The claim that more than 7,000 Chinese troops have been handed "de facto control" of Gilgit-Baltistan, a northern part of Kashmir, by Islamabad, has set alarm bells ringing in Delhi. India – which, like its nuclear-armed rival Pakistan, claims the entire state – has long been worried that the People's Liberation Army was working on roads and railway projects in the Karakoram mountains.

What is true is that China plans a massive highway linking western China to the port it is building at Gwadar, Pakistan, on the shore of the Arabian Sea. The benefits are obvious: the journey time from factory gate in, say, China's wild west, to container ships bound for the Gulf will be cut from weeks to a few days. Eventually it may even become a key energy supply route.

All of this troubles Delhi, which has long asked for China to keep its nose out of Kashmiri affairs. However, the rise of the Middle Kingdom and its need to secure passage through its own troublesome provinces of Xinjiang and Tibet through to Pakistan make this unlikely. But India suspects, too, that China is intent on becoming the hegemon of much of the eastern hemisphere – able to dictate to smaller powers the rules of the game.

In Kashmir this had led to a round of tit-for-tat diplomatic incidents. So when India refuses to allow a Chinese diplomat to visit its troubled north-eastern state of Manipur for a talk, China responds by blocking the visa of a top Indian general because it appears his command includes Kashmir.

The Himalayan state is a piece of real estate whose sovereignty has long been contested. With its demography as varied as its topography, its various peoples have long been imbued with a stubborn streak of independence.

So it may be unsurprising that when heavy rains washed away villages in the Pakistan's "Northern Areas" and Islamabad's response was to sit on its hands, the simmering revolt against Pakistani rule flared again. In response Pakistan, so the claim goes, turned to its all-weather friend China, which was more than happy to send boots flying.

All this is dismissed in Beijing but only after referring to Gilgit as a "northern part of Pakistan", which simply angered Delhi further. While Pakistan's problem in its part of Kashmir has been of too little government action, India's rule in its portion of the state has been heavy-handed and self-defeating.

Faced with a largely nonviolent revolt which began in 2008, the Indian authorities have provoked a much larger crisis with a regime of curfews and the killings of teenagers shot dead with nothing but slogans in their mouths and rocks in their hands. It is time for India to admit that its political and military strategy has failed to stabilise Kashmir.

The actions of both Pakistan and India vitiate claims that somehow either could keep the entire state happy. China has little sympathy with separatist claims – and holds sway over large chunks of the former Kashmiri kingdom.

The only way out of this mess is for Islamabad and Delhi to start rebuilding a peace process that will eventually lead to self-governance on both sides of the de facto border and a withdrawal of substantial numbers of Indian, Pakistani and, yes, even Chinese troops from Kashmir.