The Chinese incursion took place in Kashmir, the Press Trust of India said without citing a source for the information.

Chinese soldiers threatened an Indian contractor and his workers who were building a bus station near Demchok in India's Leh region along the Line of Actual Control that divides India and China. Construction work has been halted since the incident, the report said.

China has made similar incursions previously, the most serious in 1962 when the two sides fought a brief border war. The incident underscores the tensions that exist between the Asian giants stemming from India's swift economic growth and the increasing challenge it poses to China's dominance of the region.

On Monday, India's army chief, Gen. V. K. Singh, played down the incident saying it may have occurred over “a difference in perception” of where the border lies. Singh said the Line of Actual Control as perceived by India “runs in a particular direction, while the Chinese have a different alignment of the Line.” No immediate reaction was available Monday from India's defense or foreign ministries. Calls to the Chinese Foreign Ministry late Monday rang unanswered.

India and China — neighbors with more than 1 billion people each — have shared chilly relations since the 1962 war.

New Delhi says China is illegally occupying 38,000 square kilometers of its northwestern territory, while Beijing claims a 90,000 square-kilometer chunk in northeastern India. The countries have conducted 14 rounds of talks to resolve their decades-long border dispute.

China is a longtime ally and weapons supplier to Pakistan, India's bitter rival. The presence in India of the self-declared Tibetan government-in-exile, headed by the Dalai Lama, and 120,000 exiles from Tibet also remains a source of tension between New Delhi and Beijing. China is also suspicious of New Delhi's growing ties with the United States.

Despite the tensions, trade between the two sides, estimated at about $60 billion in 2010, has been booming and is expected to reach $100 billion in the next three years.