Unfortunately, due to being infected with Demon blood, Xiao was unlucky enough to become one of their kind. As it seems, unfortunately, there's nothing they can do to fix that. Even the Geo Archon- Zhongli, had a grim expression on his face as he apologized, saying that he doesn't know if there's anything to cure it. And so, he asked you if you could take care of the struggling Yaksha, until he can accept those turn of events and continue his duties. You are bonded to Xiao now.