The local stationery stores have paper clay, but that dries up. Try Ba da art supply first;
EDIT: Bada has moved as of Sept. 2009; the new address, below, is about two alleys south of Grandma Nitti’s, and one alley to the east (Long2quan2), right next to a small park, on a corner.
台北市龍泉街87巷6號 Long2quan2 St., (one alley east of and parallel to Shi1da4 Rd.), Lane 87, #6. 2363-9307.
If you can’t find any, you could then try to make your own. I’ve heard sculptors do this and have read that plasticine (non-drying modeling clay), aka plastilina, is made chiefly of stearic acid (硬脂酸), calcium carbonate (CaCO3) and petroleum jelly.
You could try getting those at Tianshui St. and mixing them to see what you get. I don’t know the proportions, but maybe you could search sculpting forums? I were you I’d experiment, and would try melting, say, 1/2 c. stearin in a double boiler on low heat just until it melts, turn the heat off, let it cool a little but while still melted add 1 Tbsp. petrolatum, and then 1/2 c. of CaCO3, stir well, pour into a disposable cup, and let it sit an hour to congeal, then try kneading it to see if it’s workable. If too sticky, add more CaCO3. You would add colors by melting a crayon or candle color flakes with the stearin, once you’ve got the recipe worked out.
I’m picking up some stearic acid tomorrow morning anyway, so I might get a bit of CaCO3 and try this myself.