Elaborating China's stand, Mr Dai, who held border talks with five Indian special representatives starting with Brajesh Mishra in 2003, said, "The disputed territory in the eastern sector of the China-India boundary, including Tawang, is inalienable from China's Tibet in terms of cultural background and administrative jurisdiction."
He said that the colonial British government which drew the "McMahon Line" accepted Beijing's claim on Tawang. China has rejected "McMahon Line" in India's case but accepted it in settling a boundary dispute with Myanmar.
"Even British colonialists who drew the illegal McMahon Line respected China's jurisdiction over Tawang and admitted that Tawang was part of China's Tibet," Dai told the China-India Dialogue magazine.
Regarded as a wily negotiator during the country's previous Hu Jintao administration, Mr Dai did not specify where China is willing to make a concession along the 3,488-km long Line of Actual Control (LAC).
Indian officials, however, said Mr Dai's proposal is neither practical nor possible for India to accept considering that Tawang is an integral part of Arunachal Pradesh and has sent representatives to Parliament in every election since 1950.
In his interview, Mr Dai said essential nature of the China-India boundary question is the "need to correct wrongs" made by colonialists and to restore fairness and justice. "For historical reasons, India now controls the majority of the disputed territory.
The boundary question was not created by China or India, so we shouldn't be inheriting it and letting the ghosts of colonialism continue to haunt our bilateral relations," he said.
Beijing has been making such demands for long. "Chinese officials began saying in the 1980s that Beijing would compromise only if India made major adjustments first, adding that once India indicated concessions in the East, China would indicate concessions in the West," Former National Security Advisor Shivshankar Menon wrote in his latest book 'Choices: Inside the Making of India's Foreign Policy'.