I have been traveling to China quite often since the late 80s and these have been my observations on how perceptions of the Chinese (in Mainland China) have changed about Indians at the street level.
Whenever we used to go visit Beijing / Shanghai / Tianjin / Guangzhou and other cities in the late 80s and onwards, the oft repeated question by the locals looking at us was "are you Pakistani?" . A reply affirming that we are Indians would be met with a cautious smile in most cases. It was amusing then for many Indians who traveled to China to be asked if we were Pakistani (and not Indian).
We never took offence at such questions but to any Chinese (then) who were interested , we would tell that though we have the same color of skin, the two nations are neighbors . More questions would follow , if Indians are Muslim, etc etc.
In the context of above account(s), I began to understand that at grassroots level, people were perceiving us as Pakistanis because of the atmosphere of friendship between the two nations. India (then) was an insignificant economy then, not much to give and take and the heightened security perception of the 80s had us perceived us as "not so friendly".
It took one to understand this and it was easier to understand where such questions (of us being Pakistanis?) came about. Then the 90s happened, China was already 10 steps ahead with Deng Xiao Ping being at helm of the economic policies. In late 90s, India opened up and Indians began travelling to China via HK . We were still mistaken as Pakistanis but we were getting a wider acceptance by our interactions. Canton Fair (the world's biggest trade fair) began seeing many Indians (and other nationals) going into China. Interactions improved by frequent visits to factories. By the decade of 2000 - and especially the latter part of that decade 2005 onwards, saw a huge number of Indian traders going into China to buy goods or to invest in Chinese manufacturing or go into tie-ups . Indians went not only into Guangzhou but also in places like Jiangsu, Zhejiang, Fujian provinces and their cities for sourcing and setting up buying offices for export trade TO India.
By now, Indians got their due recognition as INDIANS and not Pakistanis. We were and still are getting a healthy respect as an english speaking nation, about Bollywood, about our culture and there is a huge interaction on private level between the two peoples IN CHINA. And though we might not be political friends (in comparison with Pakistan-China friendship), what we DO GET is respect at least on face. No Chinese I have met openly argues that "your country is this that XYZ and my country is ABC.. ".
It would help our Indian brethren on PakDef and other forums that the Chinese are not as bad as many (here) paint them to be. People to people interactions are , I would say, HEALTHY and progressive. The dogmas of propoganda exist , no doubt but I have very good reason to believe that today's China is not as easily "BOXED IN" by what government says. There is curiosity about India, there is interest about India. And though China's internet is heavily censored , nothing can keep the human mind's inquisitiveness to KNOW about others.... Chinese included.