This is a Side Quest in the Orient (Act III). To receive the quest, talk to Lu Buwei in the courtyard north of the blacksmith, in the Village of Zhidan (use the Great Wall portal). The figurine he is looking for is in a chest in BOTH of the caves in the Jingyang Woods right behind the village. Collect either of the two figurines and return it to him.
Legacy: In the old Titan Quest / Immortal Throne, the figurine was in only one of the caves, so you had to search for it.