The Israelis could have taught them that as well, their mantra is the same...
Israelis have a pretty good relationship with chinese defence industries. no harm done even after the whole thing.
Israel backed off after tremendous pressure was put on them from the Americans to back off on the awacs.
Phalcon was prob a low risk, faster solution. but they do have a parallel domestic program that was accelerated as result of cooperation.
even after the whole thing was officially terminated, they prob helped them out alot. people who worked together for years on same project and developed close working relationships jsut don't stop talk to each other.
IAI didn't walk away empty handed from this also, the whole thing provied them with another solution for Phalcon platform, and they did fine with the indian sales.
(actually come to think of it Indian airforce chose the worst solution, those experts at 14th Institute prob knew Phalcon like back of their hands... )