The claim that North China is distinctly Confucian while the South is distinctly Daoist is, on the face of it, nonsensical. Confucianism and Daoism are both expansive traditions with shared roots in archaic Chinese culture, and boundaries between the two are exceedingly difficult to draw over the long run of history. Both originated in the North, each became one of the "Three Teachings as One" (三教合一 San jiao heyi) along with Buddhism from the high imperial period onwards, and both were about equally prevalent in most Han communities, North or South.

Needless to say, I was surprised that Wells made this claim and wanted to understand why. I found the claim in the chapter "Confucius and Lao Tse", where after introducing the "public-spirited" Confucius and the "mystical" Laozi, he has this to say about China's North-South divide (I've added modern Pinyin transliteration in brackets):

North China, the China of the Hwang-ho River [Huanghe or Yellow River], became Confucian in thought and spirit; south China, Yang-tze-Kiang [Yangzi or Changjiang River] China, became Taoist. Since those days a conflict has been traceable in Chinese affairs between these two spirits, the spirit of the north and the spirit of the south, between (in latter times) Pekin [Beijing] and Nankin [Nanjing], between the official-minded, upright and conservative north, and the skeptical, artistic, lax and experimental south.

So, in effect, Wells is conflating two different elements: one, the tension between early Confucian and Daoist thought, and two, the perception within China that there is deep distinction between Northerners (北方人 Beifangren) and Southerners (南方人 Nanfangren). His understanding of Confucianism and Daoism seems to come mainly from reading English translations of The Analects and Daodejing, as he makes no reference to later works in either tradition, and his narrative does not include important phases in the history of North-South regionalism like the period of division following the end of the Han or the emergence of the Lower Yangzi region as a major economic and cultural presence during the Tang period.

To put it plainly, it seems that Wells overreached based on a limited understanding of Chinese thought and Chinese cultural/demographic history, wrongly ascribing regional cultural differences to some kind of early philosophical split which did not, in fact, occur. The North-South split, which is often overstated and influenced by contemporary prejudices, owes more to different economic, political and environmental conditions over many centuries than to any kind of early intellectual divergence.