Cut chicken into 1-inch cubes.
In a medium bowl, mix together the flour, cornstarch, salt and pepper. Add the egg, oil and water, whisking until smooth.
Add the chicken cubes to the mixture, making sure the chicken gets thoroughly coated. Cover and chill for 30 minutes in the fridge. (If you're in a hurry, 10 minutes will do.)
In a medium saucepan or deep fryer, add 2 inches of oil and heat to 350˚F (177˚C). Line a plate with paper towels and set aside.
Add the marinated chicken cubes in batches of about 10-15 pieces, shaking off excess batter if needed. Deep fry for 2-3 minutes until golden, turning halfway through with a slotted spoon for even browning.**
Remove to the plate and cover with foil to keep warm while you make the sauce.