Unfortunately, I'm not entirely sure how Mental health was perceived in China at that time however, a few months back when I answered a question on the "History of Psychiatry" I touched on how mental health was treated in the middle east & asia, so perhaps that infomation could be extrapolated to China as well. I'll post the relevant section below however you can read the full answer (which includes the sources I used) above:

Skipping gleefully forward into 8th Century Baghdad, we see some of the first psychiatric hospitals. These hospitals were humane as muslims believed the mentally ill were incapable of doing things yet deserving of treatment. You can see here in this painting of a Muslim doctor treating a mentally ill patient. This treatment can be linked to the Islamic belief of "Greater Jihad" (أكبر الجهاد; al-jihad al-akbar), Whereas "Lesser Jihad" (الجهاد الأصغر; al-jihad al-asghar) is an outer physical struggle against the enemies of Islam, Greater Jihad is the struggle against oneself.

Hopefully this helped somewhat, if I can find more infomation I shall come back & add to this answer but in the meantime if anyone else is knowledgeable on this subject feel free to chime in. :)