More like India realized that Biden wont be coming to their rescue. Do remember that Biden and Modi spoke just few days back and Modi was probably informed that they're on their own here. He had no option but to accept whatever China demanded. Lol
Biden and US may not give much if any assistance to India but it's quite possible China had few demands. The Indians have nothing to give China and China basically putting what they captured back to being disputed territory only serves to improve China's image of being reasonable and peaceful in the minds of rational Indians. The Jai Hind crowd will forever be the way they are. They would only call it Indian defeat if New Delhi is being invaded. Anything else is Indian victory to them as evidenced by the countless media propaganda and lies they've propagated.
China's been relatively unchallenged in holding half of the disputed land. Indians attacked once in June and got over 40 jawans captured. Then they tried capturing unguarded positions in Chinese side and were repelled within a week. The Indians couldn't repel PLA from Galwan valley to finger 4 for a year.
Why did China change its mind about simply redrawing the borders to those new lines? well for one thing it had no interest in a war with India even if it is capable of winning a conventional or nuclear one. It had no interest in gaining actual Indian land that both sides recognise as India's. Sitting there is always going to be a cause for hatred from Jai Hinds and at least annoyance and drama from normal Indians. Creating more Jai Hinds our of normal Indians is definitely not something China should want to do but it pretty much already did. These lower strategic matters the CCP never think about. This has been abundantly clear in many ways. They love to play that 100 year game.
Another potential worrying reason for ensuring India and China are as far from going to war as possible is things heating up with Taiwan or an anticipated US kinetic war. While this is technically the US becoming a huge factor in the confrontation between India and China, it is unrelated.