For the sauce: Pour water and vinegar into a saucepan, and bring to a boil over high heat. Stir in sugar, red pepper flakes, ketchup and cornstarch/water mixture; simmer for 5 minutes or until it starts to thicken. Pour into a bowl and refrigerate until ready to serve.
Toss the chicken in some flour to coat then set the chicken aside.
In a bowl, mix together the egg, flour, cornstarch, baking powder, and pinch of salt.
Slowly add water to the flour mixture until a thick pancake like batter forms.
Heat the oil in a pot on medium heat to 350 degrees.
Dip the chicken into the batter to coat completely (allowing the excess batter to drip off) and then slowly immerse the chicken into the hot oil. Work in batches if needed as to not overcrowd the oil.
Cook until golden brown on all sides and to an internal temperature of 160 degrees using a thermometer. Drain on a paper towel lined plate to drain excess oil.
Drizzled the sauce on the chicken and garnish with scallions.