The request is reasonable from their side: they will invest in building your brand and do not want a competitor to benefit. The risk is equally real from yours: an exclusive distributor who underperforms blocks the entire territory.
Never grant it flat
Exclusivity should always be conditional and time-limited. Three mechanisms make it safe to give:
- Volume commitments. Exclusivity continues only if agreed volumes are met, measured per period rather than cumulatively.
- A defined territory. « China » is not a territory. A province, a channel or a customer segment is. Most distributors are genuinely strong in one region, and granting the country gives away what they cannot serve.
- A term with a review. Two years with a renewal decision beats an open-ended grant that is painful to unwind.
What to keep regardless
Your trademark registrations in your own name. Direct visibility of end customers where possible. And the right to sell directly in channels the distributor does not serve — online, or to a category of customer they do not reach. These are not aggressive terms; they are what makes exclusivity survivable.
A distributor who refuses any condition on exclusivity is telling you how the relationship will go. That refusal is information, and it arrives free.