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In a large frying pan, heat oil over medium heat. Add chicken and cook, turning, until golden brown, about 10 minutes.
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Meanwhile, in a small bowl, combine onion, ketchup, vinegar, soy sauce, sugar, pepper and 1/2 cup water, blend well.
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Pour sweet and sour mixture over chicken. Cover, reduce heat to low, and cook 20 minutes, until tender. Remove chicken to a serving platter.
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Add cornstarch to 1/4 cup cold water, add to sauce. Raise heat, bring to a boil, and cook, stirring until sauce thickens, about 2 minutes. Pour over chicken and serve.