This chapter aims to shed light on the conceptualization of the term ‘water diplomacy’. Theoretical discussion is developed to analyse the nature, forms and outcomes, which suggest that water diplomacy is complex and can lead to intended and unintended outcomes. It then examines China’s perception of the water issue, which is related to security interests. It is highlighted that water represents a new arena where unique strategic interests and approaches are displayed in the policy of international water-sharing. A discussion on methodology analyses the criteria that are adopted in select cases and why these contextual factors are likely to impact on the outcomes of China’s water diplomacy with its neighbouring states.