Jilong became a center for Buddhism in Taiwan through one institution, the Lingquan si, which positioned itself as the epicenter for a fusion of Chinese and Japanese Buddhism. Its successes in this regard had less to do with the effective proselytizing of Japanese Buddhists than it did with the energy and talents of its founder, a monk named Shanhui (prior to ordination, his name was Jiang Azhen), who grew up near Jilong, studied with a Chan/Zen monk who came to Jilong in 1900 from the Yongquan si at a place called Gushan, in Fujian Province, where Shanhui went to receive ordination in 1902. After returning to Jilong, Shanhui and his master solicited donations from Xu Zisang, Yan Yunnian, and other prominent Taiwanese elites to found a new temple on Mt. Yuemei, in the hills just southeast of Jilong. Before it opened in 1908, Shanhui met with the abbot of the local Sōdō Zen temple and promised to make his new temple a branch of that sect, which he himself joined not long after. The Taiwan nichinichi shinpō announced the founding on January 18, 1906:

In the Yutian district of Jilong, the monk Jiang Azhen announced that, thanks to the almsgiving of the adherents, a temple called the Lingquan Temple was established in Jilong bao, Yongku zhuang. As a result of the introduction made by the Sōdō sect missionary, Takagishi Tamenori, this temple will become a branch temple of the same sect's root temples (honzan), the Eiheiji and the Sōjiji.

The Lingquan Temple rapidly became the most important Buddhist institution for Taiwanese in (or near) Jilong, as almost all of the nearly 1500 Taiwanese registered as belonging to a Buddhist sect in 1919 were members of this institution. As a monk ordained in the Chan/Zen tradition, it did not take a great leap of faith for Shanhui to link himself and his institution to the Sōdō sect. Indeed, when Taiwanese joined the Japanese sects, they did so at the points of greatest familiarity: either through the Lingquan Temple, with its Taiwanese leaders, or through Pure Land, which worshiped Amitabha Buddha, much as did adherents of popular Buddhism, or “vegetarian teaching,” who practiced their beliefs at the local zhaitang.