Troops have been confronting each other at the Doklam plateau, a territory close to the Indian border maintained by both China and India’s close ally Bhutan, since New Delhi sent armed forces to stop Chinese workmen from building a road there in June.
India has previously claimed the Chinese military activity was a threat to its northeast region.
China also threatened the dispute would escalate if India did not withdraw its military.
The Chinese foreign ministry said earlier this month: “China will take all necessary measures to safeguard its legitimate and lawful rights and interests.”
However, on Monday the Indian foreign ministry announced the rivals had agreed to defuse the mounting crisis after diplomatic talks.
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The foreign ministry said in a statement: “In recent weeks, India and China have maintained diplomatic communication in respect of the incident at Doklam.
“On this basis, expeditious disengagement of border personnel at the face-off site at Doklam has been agreed to and is on-going.”
But although Indian troops have left the Doklam region, China’s foreign ministry spokeswoman Hua Chunying said Chinese troops would continue to patrol the area.
She said: “China will continue to exercise sovereignty rights to protect territorial sovereignty in accordance with the rules of the historical boundary.”
The Chinese defence ministry added that troops would remain on a state of alert.
She said: “We remind the Indian side to learn the lesson from this incident, earnestly respect the historical boundary and the basic principles of international law, meet China half way and jointly protect the peace and tranquillity of the border region.
“The world is not peaceful, and peace needs to be safeguarded. The Chinese military has the confidence and the ability to protect the country’s sovereignty, security and development interests.”
The decision to pull back from the standoff came ahead of the summit of the BRICS nations, a group which also includes Brazil, Russia and South Africa, in China this month.
China hopes the gathering will be a show of cooperation and friendship among Third World countries.
Lin Minwang, an India expert and the deputy director of the Centre for South Asia Studies at China’s Sudan University, said the agreement to pull troops would ensure the BRICS summit went smoothly.
She said: “Both sides should be happy. Modi is also happy. They can conduct a meeting smoothly and naturally. If there was still a stand-off, how could they meet?”