When Buddhism arrived in China, around the first century A.D., it encountered a culture which was more than two thousand years old. In this ancient culture, philosophical thought had reached its culmination during the late Chou period (c. 500-221 B.C.), the golden age of Chinese philosophy, and from then on had always been held in the highest esteem.
From the beginning, this philosophy had two complementary aspects. The Chinese being practical people with a highly developed social consciousness, all their philosophical schools were concerned, in one way or the other, with life in society, with human relations, moral values and government. This, however, is only one aspect of Chinese thought. Complementary to it is that corresponding to the mystical side of the Chinese character, which demanded that the highest aim of philosophy should be to transcend the world of society and everyday life and to reach a higher plane of consciousness. This is the plane of the sage, the Chinese ideal of the enlightened man who has achieved mystical union with the universe. The Chinese sage, however, does not dwell exclusively on this high spiritual plane, but is equally concerned with worldly affairs. He unifies in himself the two complementary sides of human nature -intuitive wisdom and practical knowledge, contemplation and social action- which the Chinese have associated with the images of the sage and of the king. Fully realized human beings, in the words of Chuang Tzu, "by their stillness become sages, by their movement kings."
During the sixth century B.C., the two sides of Chinese philosophy developed into two distinct philosophical schools, Confucianism and Taoism. Confucianism was the philosophy of social organization, of common sense and practical knowledge. It provided Chinese society with a system of education and with strict conventions of social etiquette. One of its main purposes was to form an ethical basis for the traditional Chinese family system with its complex structure and its rituals of ancestor worship. Taoism, on the other hand, was concerned primarily with the observation of nature and the discovery of its Way, or Tao. Human happiness, according to the Taoists, is achieved when men follow the natural order, acting spontaneously and trusting their intuitive knowledge.
These two trends of thought represent opposite poles in Chinese philosophy, but in China they were always seen as poles of one and the same human nature, and thus as complementary. Confucianism was generally emphasized in the education of children who had to learn the rules and conventions necessary for life in society, whereas Taoism used to be pursued by older people in order to regain and develop the original spontaneity which had been destroyed by social conventions. In the eleventh and twelfth centuries, the Neo-Confucian school attempted a synthesis of Confucianism, Buddhism and Taoism, which culminated in the philosophy of Chu Hsi, one of the greatest of all Chinese thinkers. Chu Hsi was an outstanding philosopher who combined Confucian scholarship with a deep understanding of Buddhism and Taoism, and incorporated elements of all three traditions in his philosophical synthesis.
Confucianism derives its name from Kung Fu Tzu, or Confucius, a highly influential teacher with a large number of students who saw his main function as transmitting the ancient cultural heritage to his disciples. In doing so, however, he went beyond a simple transmission of knowledge for he interpreted the traditional ideas according to his own moral concepts. His teachings were based on the so-called Six Classics, ancient books I of philosophical thought, rituals, poetry, music, and history, which represented the spiritual and cultural heritage of the "holy sages" of China's past. Chinese tradition has associated Confucius with all of these works either as author, commentator, or editor; but according to modern scholarship he was neither the author, commentator, nor even the editor of any of the Classics. Hi own ideas became known through the Lun Yu, or Confucian Analects, a collection of aphorisms which wa compiled by some of his disciples.
The originator of Taoism was Lao Tzu, whose name literally means "The Old Master" and who was, according to tradition, an older contemporary of Confucius. He is said to have been the author of a short book of aphorisms which is considered as the main Taoist scripture. In China, it is generally just called the Lao-tzu, and in the West it is usually known as the Tao Te Ching, the Classic of the Way and Power, a name which was given to it in later times. I have already mentioned the paradoxical style and the powerful and poetic language of this book which Joseph Needham considers to be "without exception the most profound and beautiful work in the Chinese language."
The second important Taoist book is the Chuang-tzu a much larger book than the Tao Te Tjing, whose author, Chuang Tzu, is said to have lived about two hundred years after Lao Tzu. According to modern scholarship, however, the Chuang-tzu, and probably also the Lao-tzu, cannot be seen as the work of a single author, but rather constitute a collection of Taoist writing compiled by different authors at different times.
Both the Confucian Analects and the Tao Te Tjing are written in the compact suggestive style which is typical of the Chinese way of thinking. The Chinese mind was not given to abstract logical thinking and developed a language which is very different from that which evolved in the West. Many of its words could be used as nouns adjectives, or verbs, and their sequence was determined not so much by grammatical rules as by the emotional content of the sentence. The classical Chinese word was very different from an abstract sign representing a clearly delineated concept. It was rather a sound symbol which had strong suggestive powers, bringing to mind an indeterminate complex of pictorial images and emotions. The intention of the speaker was not so much to express an intellectual idea, but rather to affect and influence the listener. Correspondingly, the written character was not just an abstract sign, but was an organic pattern -a "gestalt"- which preserved the full complex of images and the suggestive power of the word.
Since the Chinese philosophers expressed themselves in a language which was so well suited for their way of thinking, their writings and sayings could be short and inarticulate, and yet rich in suggestive images. It is clear that much of this imagery must be lost in an English translation. A translation of a sentence from the Tao Te Ching, for example, can only render a small part of the rich complex of ideas contained in the original, which is why different translations from this controversial book often look like totally different texts. As Fung Yu-Lan has said, "It needs a combination of all the translations already made and many others not yet made, to reveal the richness of the Lao-tzu and the Confucian Analects in their original form."
The Chinese, like the Indians, believed that there is an ultimate reality which underlies and unifies the multiple things and events we observe:

There are the three terms -"complete," "all-embracing," "the whole." These names are different, but the reality sought in them is the same: referring to the One thing.

They called this reality the Tao, which originally meant 'the Way.' It is the way, or process, of the universe, the order of nature. In later times, the Confucianists gave it a different interpretation. They talked about the Tao of man, or the Tao of human society, and understood it as the right way of life in a moral sense.
In its original cosmic sense, the Tao is the ultimate, undefinable reality and as such it is the equivalent of the Hinduist Brahman and the Buddhist Dharmakaya. It differs from these Indian concepts, however, by its intrinsically dynamic quality which, in the Chinese view, is the essence of the universe. The Tao is the cosmic process in which all things are involved; the world is seen a continuous flow and change.
Indian Buddhism, with its doctrine of impermanence, had quite a similar view, but it took this view merely the basic premise of the human situation and went to elaborate its psychological consequences. The Chinese on the other hand, not only believed that flow and change were the essential features of nature, but also that there are constant patterns in these changes, to be observed by man. The sage recognizes these patterns and directs his actions according to them. In this way he becomes 'one with the Tao,' living in harmony with nature and succeeding in everything he undertakes. In the words of Huai Nan Tzu, a philosopher of the second century B.C.:

He who conforms to the course of the Tao,
 following the natural processes of Heaven and Earth,
 find it easy to manage the whole world.

What, then, are the patterns of the cosmic Way which man has to recognize? The principal characteristic of Tao is the cyclic nature of its ceaseless motion change. "Returning is the motion of the Tao," says Tzu, and "Going far means returning." The idea is all developments in nature, those in the physical world as well as those of human situations, show cyclic pattern of coming and going, of expansion and contraction.
This idea was no doubt deduced from the movement of the sun and moon and from the change of seasons, but it was then also taken as a rule of life. Chinese believe that whenever a situation develops its extreme, it is bound to turn around and become opposite. This basic belief has given them courage and perseverance in times of distress and has made them cautious and modest in times of success. It has led to the doctrine of the golden mean in which both Taoists and Confucianists believe. "The sage," says Lao Tzu, "avoids excess, extravagance, and indulgence."
In the Chinese view, it is better to have too little than to have too much, and better to leave things undone than to overdo them, because although one may not get very far this way, one is certain to go in the right direction. Just as the man who wants to go farther and farther East will end up in the West, those who accumulate more and more money in order to increase their wealth will end up being poor. Modern industrial society which is continuously trying to increase the "standard of living" and thereby decreases the quality of life for all its members is an eloquent illustration of this ancient Chinese wisdom.
The idea of cyclic patterns in the motion of the Tao was given a definite structure by the introduction of the polar opposites yin and yang. They are the two poles which set the limits for the cycles of change:

The yang having reached its climax retreats
in favor of the yin; the yin having reached
its climax retreats in favor of the yang.

In the Chinese view, all manifestations of the Tao are generated by the dynamic interplay of these two polar forces. This idea is very old and many generations worked on the symbolism of the archetypal pair yin and yang until it became the fundamental concept of Chinese thought. The original meaning of the words yin and yang was that of the shady and sunny sides of a mountain, a meaning which gives a good idea of the relativity of the two concepts:

That which lets now the dark, now the light appear is Tao.

From the very early times, the two archetypal poles of nature were represented not only by bright and dark, but also by male and female, firm and yielding, above and below. Yang, the strong, male, creative power, was associated with Heaven, whereas yin, the dark, receptive, female and maternal element, was represented by the Earth. Heaven is above and full of movement, the Earth -in the old geocentric view- is below and resting, and thus yang came to symbolize movement and yin rest. In the realm of thought, yin is the complex, female, intuitive mind, yang the clear and rational male intellect. Yin is the quiet, contemplative stillness of the sage, yang the strong, creative action of the king.
The dynamic character of yin and yang is illustrated by the ancient Chinese symbol called Fai-ch; T'u, 'Diagram of the Supreme Ultimate':

This diagram is a symmetric arrangement of the dark yin and the bright yang, but the symmetry is not static. It is a rotational symmetry suggesting, very forcefully, continuous cyclic movement:

The yang returns cyclically to its beginning; the yin
attains its maximum and gives place to the yang.

The two dots in the diagram symbolize the idea that each time one of the two forces reaches its extreme, it contains in itself already the seed of its opposite.
The pair of yin and yang is the grand leitmotiv that permeates Chinese culture and determines all features of the traditional Chinese way of life. "Life," says Chua Tzu, "is the blended harmony of the yin and yang." As a nation of farmers, the Chinese had always been familiar with the movements of the sun and moon and with the change of the seasons. Seasonal changes and the resulting phenomena of growth and decay in organic nature we thus seen by them as the clearest expressions of the interplay between yin and yang, between the cold a dark winter and the bright and hot summer. The seasonal interplay of the two opposites is also reflect in the food we eat which contains elements of yin and yang. A healthy diet consists, for the Chinese, in balancing these yin and yang elements.
Traditional Chinese medicine, too, is based on the balance of yin and yang in the human body, and a illness is seen as a disruption of this balance. The body is divided into yin and yang parts. Globally speaking, the inside of the body is yang, the body surface is yin; the back is yang, the front is yin; inside the body, there are yin and yang organs. The balance between all these parts is maintained by a continuous flow of ch'i, or vital energy, along a system of "meridians" which contain the acupuncture points. Each organ has a meridian associated with it in such a way that yang meridians belong to yin organs and vice versa. Whenever the flow between the yin and yang is blocked, the body falls ill, and the illness is cured by sticking needles into the acupuncture points to stimulate and restore the flow of ch'i.
The interplay of yin and yang, the primordial pair of opposites, appears thus as the principle that guides all the movements of the Tao, but the Chinese did not stop there. They went on to study various combinations of yin and yang which they developed into - a system of cosmic archetypes. This system is elaborated in the I Ching, or Book of Changes.
The Book of Changes is the first among the six Confucian Classics and must be considered as a work which lies at the very heart of Chinese thought and culture. The authority and esteem it has enjoyed in China throughout thousands of years is comparable only to those of sacred scriptures, like the Vedas or the Bible, in other cultures. The noted sinologue Richard Wilhelm begins the introduction to his translation of the book with the following words:

The Book of Changes -I Ching in Chinese- is unquestionably one of the most important books in the world's literature. Its origin goes back to mythical antiquity, and it has occupied the attention of the most eminent scholars of China down to the present day. Nearly all that is greatest and most significant in the three thousand years of Chinese cultural history has either taken its inspiration from this book, or has exerted an influence on the interpretation of its text. Therefore it may safely be said that the seasoned wisdom of thousands of years has gone into the making of the I Ching.

The Book of Changes is thus a work that has grown organically over thousands of years and consists of many layers stemming from the most important periods Chinese thought.
The use of the I Ching as a book of wisdom is, in fact, of far greater importance than its use as an oracle. It has inspired the leading minds of China throughout the ages, among them Lao Tzu, who drew some of his profoundest aphorisms from this source. Confucius studied it intensively and most of the commentaries on the text which make up the later strata of the book go back to his school. These commentaries, the so-called Ten Wings, combine the structural interpretation of the hexagrams with philosophical explanations.
At the center of the Confucian commentaries, as of the entire I Ching, is the emphasis on the dynamic aspect of all phenomena. The ceaseless transformation of all things and situations is the essential message of the Book of Changes:

The Changes is a book
From which one may not hold aloof.
Its tao is forever changing-
Alteration, movement without rest,
Flowing through the six empty places,
Rising and sinking without fixed law,
Firm and yielding transform each other.
They cannot be confined within a rule,
It is only change that is at work here.