Taiwan hinoki (Chamaecyparis obtusa Sieb. & Zucc. var. formosana (Hayata) Rehder) is one of the dominant coniferous species in subtropical montane cloud forests in Taiwan, with a high affinity for fog immersion. With the changing climate, the species is expected to face new environmental challenges. Identifying stress factors affecting species regeneration is therefore crucial for understanding how the species would be affected by future climatic scenarios. Our study quantified seedling performance by biomass increment to identify the effect of key ecological factors, namely short-duration drought (watering every 4, 8, 12 days), type of substrate (forest soil and coarse wood debris [CWD]), and bryophyte carpet, on seedlings’ early-stage performance. Furthermore, we explored both morphological and physiological traits to unveil possible adaptation strategies. The results revealed that bryophyte carpets accumulated nutrient-rich humus, which reduced the nutrient regime difference between CWD and soil. Short-duration drought was confirmed to be a stress factor for the seedlings, particularly under prolonged drought scenario, whereas the drought mitigation ability of CWD and bryophyte carpet was weaker than expected. By considering the field observation, we concluded that the bryophytes carpet with humus accumulation on CWD, but not the CWD itself, facilitates the seedlings’ regeneration. Furthermore, prolonged drought under climate change could pose a potential threat to the seedlings in their early stages, adversely affecting regeneration.