It's a dispute which has been troubling India for decades, yet there is no solution in sight. The border dispute between India and China intrigues one and all, as China does nothing concrete even though India has taken several steps to find a solution. And that makes one wonder why China is so reluctant to reach to an effective agreement with India.
Over the years India has changed its stance on the border dispute. At some point of time in history India was not keen to accept that there's a border dispute with China. India's position was that the border between the two countries had been defined by treaties, customs and usage. From those stubborn days India has mellowed down and said the dispute existed but it will not hinder the bilateral relations which can grow side by side. Yet, China seems to be wary of India.
China needs to understand that if the border dispute is settled then both the countries can focus more robustly on other aspects of the bilateral ties, especially trade ties. Chinese investments in India will be welcome by a large section of the Indian establishment and similarly Indian expertise in certain sectors --- like the information technology and software --- will benefit China. The two countries can collaborate across the fields and build a fantastic coalition that will benefit Asia in general.
It's not that Chinese foreign policy experts and others in the government don't understand this simple thing. But their problem is different. It's the United States of America. I think China is always worried that India will play in the hands of the United States. The American strategy to deal with a rising China will not be effective if there are no Asian powers aligned with the US. And India could be that Asian power besides Japan and other South East Asian countries --- Vietnam, the Philippines, South Korea and the rest. While China can deal with these nations by use of coercive power (South China Sea) and other economic tactics, they will not really work in case of India. Therefore, China has been using the border dispute as a tool to keep India under pressure.
China has objected to India's decision of constructing roads along the border; it has increased it's presence in Pakistan Occupied Kashmir; and trying to encircle India. However, these pressure tactics will not work. The new Indian government will not be cowed down by the Chinese antics. Despite all the right noises made by both the sides in recent times, the Indian position has hardened, thanks to China's obstinate attitude.
This hardened position will get reflected over a period of time and India will align itself more with South East Asian countries, and Japan, much to China's chagrin. China can blame only itself for not doing enough to move ahead with the times. If it wants to be respected as a trusted neighbour, China needs to respect India too. Sadly, China doesn't want to follow this rule.