Chapter five contains the harshest image in the book. Heaven and earth are not kind, and treat the ten thousand things as straw dogs; the sage is not kind either, and treats the people as straw dogs.
The figure depends on knowing what a straw dog was. Bound out of straw for a sacrificial rite, it was handled with elaborate care while the rite required it, decorated, carried in a covered box, and then, once the ceremony was over, thrown into the road and trodden on or burnt. Nothing about the object changed. What changed was the moment.
That is the claim being made. Heaven and earth do not hold anything in special regard and do not withdraw regard either; things are used as the occasion has it, and then they are not. The word rendered as kind is the standard term for the cardinal Confucian virtue of humaneness, which makes the line a direct refusal of the position that the cosmos, or a good ruler, operates by benevolence toward particular objects of concern.
Whether the second half is bleak or liberating is a genuine interpretive fork. A sage who does not favour is a sage who does not have favourites, which for anyone outside the favoured group is the better arrangement. Read the other way, it is a licence for indifference. The chapter does not choose, and the two readings have both been current since the earliest commentaries.