Nalanda's revival figured prominently in the 10-point agreement President Hu Jintao signed with India to bring the two countries closer together last November. It wasn't wholly unexpected, as Beijing's commitment to the project is rooted in history.
Chinese Buddhist monk Xuanzang travelled to Nalanda in AD627. He lived on the campus for 13 years, studying and translating Indian Buddhist literature into Chinese, laying foundations for the spread of Buddhism in China. His memoirs also inspired the 16th-century novel by Wu Chengen Journey to the West.
'Next time I will come walking like Xuanzang,' declared then foreign minister Li Zhaoxing in February as he inaugurated a glittering memorial to Xuanzang near the university's ruins in Bihar. Earlier, Beijing had sent 10 truckloads of material to build the memorial hall, which houses a Chinese-made 10-metre statue of the 7th-century pilgrim.
Before Mr Li's visit, two Buddhist monks - one from the mainland and the other from Taiwan - travelled on foot from Shaanxi province to Nalanda, tracing the route undertaken by the Chinese monk hundreds of years ago.
Accompanied by a TV crew, they trekked through Pakistan and Nepal. Their four-month pilgrimage was organised by the mainland's State Administration for Religious Affairs.
The memorial to Xuanzang reflects the twists and turns in Sino-Indian relations and is replete with ironies. A relic of the monk - a piece of the pilgrim's skull kept in a bowl in the memorial - was despatched to Nalanda by former premier Zhou Enlai in 1956 when bilateral ties were at their best.
Zhou entrusted the task of carrying the relic to the Dalai Lama, who went to India in 1956 to take part in a Buddhist religious anniversary.
The Dalai Lama was said to have wanted to settle in India after delivering the relic to the then prime minister Jawaharlal Nehru, but Nehru persuaded him to return to Tibet, reportedly under pressure from Zhou. However, the Dalai Lama fled to India in 1959 after a Chinese crackdown.
In 1961, China sent the Indian government a cheque to pay for the Xuanzang memorial. But the following year the two countries fought a full-scale border war and cut all ties.
At the monument's inauguration, Mr Li recalled how Nehru had personally received Xuanzang's relic but did not mention the Dalai Lama. The hosts also refrained from spoiling the Chinese delegation's mood by not highlighting the Dalai Lama's role in bringing the relic to India.