Universities in Britain, the US, Australia and New Zealand that increasingly rely on tuition fees paid by students from China face a dramatic fall in their incomes.
Officials in Beijing have informed Australian diplomats that the number of Chinese students prepared to pay full fees to study at overseas universities fell sharply for the first time last year. Although no details were given, the news will add to growing concern in Australia that the export education market may have peaked in 2004.
The situation is likely to worsen given that China is rapidly establishing more of its own universities and has decided to allow Hong Kong universities to recruit more students from the mainland. The Beijing Ministry of Education gave permission for Hong Kong's eight universities to use the national universities admission system to attract students. At least 7 million Chinese are allocated places in mainland colleges and universities through the system. Hong Kong universities will be able to recruit students from 17 provinces and cities this year, giving them access to a potential pool of 4 million. Scholarships will be offered to at least 75 mainland students at each university.
Australian universities have just learnt that the number of higher education visas issued offshore to students in China fell by 2 per cent in 2004 although enrolments jumped by 43 per cent over the previous year.
But British universities are already experiencing a sharp enrolment decline. Data from the Universities and Colleges Admissions Service indicates a 25 per cent fall, and Universities UK has reported that the drop in some institutions has been as big as 50 per cent.
Figures compiled by Australia's main recruiting agency, IDP Education, show that in the second semester last year, 24,000 students from China were enrolled at Australian universities. They comprised 20 per cent of international enrolments, compared with 11 per cent from India, 10 per cent from Malaysia and 8 per cent from Hong Kong.
Australia has already been hit by a sharp decline in Hong Kong students studying in Australia, where travel costs and fees have risen in line with the increasing value of the Australian dollar.
Glyn Davis, vice-chancellor of the University of Melbourne, said: "The main focus may now shift from attracting students to holding those we have. If that income from foreign students begins to fall, the spare capacity in the system will also undermine the market for domestic fee-paying students."
This would mean "a whole lot of institutions" would find themselves in very difficult financial circumstances, Professor Davis said. This could force the Federal Government to look at the funding base of the university system.