Neo-Confucianism had its roots in the thinking of some Tang Dynasty philosophers such as Han Yu, Li Au and Zhou Dun-yi. The Tang Dynasty was founded in 618 AD and lasted until 907. It is generally regarded as a high point in Chinese culture, with Chinese rule stretching over more territory than ever before. It was during this dynasty in 622 that the examination system to select court officials was reestablished. Emperor Tai Zong was responsible for bringing Confucianism back as the official teaching of the state by establishing a Confucian temple in the Imperial University and ordering scholars to prepare official commentaries on the Confucian classics. (Feng You-lan A Short History of Chinese Philosophy page 266)

Feng You-lan continues here to say though that by this time Confucianism had already lost its vitality. Philosophical speculation had been made available to the common people through the teachings of Buddhism and Daoism, making Confucianism seem like a philosophy for the elite to maintain power. In order to face these challenges, Confucian philosophers needed to reinterpret their tradition and breathe some new life into it. Wing-tsit Chan calls Zhou Dun-yi the founder of Neo-Confucianism. (The Way Of Lao Zi page 149) and recounts that in Zhou’s philosophy is based on the Great Ultimate, which really reads as the Non-Ultimate in Chinese characters. Chan says the Non-Ultimate generates the cosmic forces of yin and yang through which in transformation the myriad of creation is produced. This notion of the Non-Ultimate can be found in Chapter 28 of the Dao De Jing:

“He who knows the white and yet keeps to the black, becomes the model for the world. Being the model for the world, he will never deviate from eternal virtue, but returns to the state of the Non-Ultimate.” (Translation by Wing-tsit Chan)

Both Feng and Chan mention the debt to the Confucian classic the Book of Changes for the development of Zhou’s cosmology. Chan says that he borrowed the concept from the Lao Zi and added to it the idea of the Great Ultimate in the book of changes. In the speculations of Zhou Dun-yi, we see the initial attempts to develop a metaphysical basis for Confucianism, which was then later developed by the great thinker Zhu Xi in the Sung Dynasty.