By Zeba Siddiqui and Fayaz Bukhari
SRINAGAR, India (Reuters) - India engaged in a diplomatic war of words with China over Kashmir on Thursday as it formally revoked the disputed state's constitutional autonomy and split it into two federal territories in a bid to integrate it fully into India.
Shops and offices were shut in Muslim-majority Kashmir and the streets largely deserted in its main city Srinagar as new administrators were sworn into office in the biggest restructuring of the 173 year-old former princely kingdom of Jammu and Kashmir.
Pakistan, which claims the whole of Kashmir, has condemned the move and protesters took to the streets on its part of the territory.
Its ally China, which is locked in a separate decades-old dispute with India over the part of Kashmir called Ladakh, also slammed India for unilaterally changing its status.
Chinese Foreign Ministry spokesman Geng Shuang said Kashmir was a dispute left from history that should be peacefully resolved.
"The Indian government officially announced the establishment of so called Jammu Kashmir territory and Ladakh Union territory which included some of China's territory into its administrative jurisdiction," Geng said at a news briefing.
"China deplores and firmly opposed that. India unilaterally changes its domestic law and administrative divisions, challenging China's sovereignty and interests. This is awful and void, and this is not effective in any way and will not change the fact that the area is under China's actual control."
India and China fought a war in 1962 and since then have been unable to resolve their border dispute.
India's foreign ministry spokesman rejected China's comments and said Kashmir was an integral part of the country and that any reorganization of the state was an internal affair.
"We do not expect other countries, including China, to comment on the matters which are internal to India, just as India refrains from commenting on internal issues of other countries," Raveesh Kumar told a news conference.
New Delhi has refrained from any comment on China's policy in remote Xinjiang, refusing to join U.S.-led calls that it stop detaining ethnic Uighurs and other Muslims. It has also scaled-back top level official contacts with Tibetan spiritual leader the Dalai Lama, who lives in exile in northern India.
Kumar said China was in illegal occupation of parts of Kashmir including Ladakh and had also illegally acquired some territories from Pakistan.
The diplomatic rift came just days after Indian Prime Minister Narendra Modi and Chinese President Xi Jinping held an informal summit in southern India vowing to improve political and economic ties.
Modi has said the special privileges Kashmir enjoyed for decades, such as property rights and government jobs only for locals, had hindered its development and fueled separatism.
Just after midnight on Wednesday, the federal government's orders went into effect, dividing up the old state of Jammu and Kashmir into two union territories -- one Jammu and Kashmir, and the other the Buddhist-dominated enclave of Ladakh.
Both will be directly ruled by Delhi, and new lieutenant governors were sworn in at a high-security governor's premises later on Thursday.
"The unfulfilled dream of integrating Jammu and Kashmir has been accomplished," said Home Minister Amit Shah, who is leading the political strategy to deal with Kashmir.
India is hoping that by opening up property rights in Kashmir to people from outside the region it can reignite economic growth, create jobs and turn the focus away from a militant uprising in which more than 40,000 people have died.
It blames Pakistan for keeping the revolt alive, allegations its nuclear-armed neighbor denies. Pakistan and India have fought two wars since independence in 1947 and this year engaged in an aerial clash over the territory.
Angry protesters took to a main thoroughfare in Pakistani Kashmir's main city Muzaffarabad on Thursday to condemn the bifurcation into two federal territories.
"Down with India" and "We want freedom", they chanted.
(Additional reporting by Catherine Cadell in Beijing, Abu Arqam Naqash in Muzaffarabad; and C.K.Nayak in New Delhi; Writing by Sanjeev Miglani; Editing by)