Chinese government officials warned UK universities this week that the dramatic decline in their most lucrative overseas student market will be permanent unless they take urgent action.
UK universities are bracing themselves to face a major hole in their finances after a British Council report issued in Beijing showed that the UK had for the first time lost its lead position in the global market for Chinese students.
It came as figures this week from the Universities and Colleges Admissions Service revealed a 22.5 per cent drop in the number of Chinese students enrolling on UK courses this year.
The figures will send shock waves through the sector, which has targeted the Chinese market to boost revenues. Chinese students bring an estimated £80 million a year to UK universities.
Chinese officials said that the decline was due to a number of factors, including the rising cost of studying in the UK, few opportunities to gain work experience, problems with visas and lax standards at some partner institutions. Chinese education ministers are planning a red and yellow card warning system for courses split between the UK and China, which account for 40 per cent of students going to the UK.
The expanding Chinese academic sector is also reducing the pool of students looking overseas.
Che Weimen, director of the Division of International Co-operation and Exchange, a Chinese government-funded agency that advises students on study abroad, said: "Although the UK has had a good reputation, it no longer has an advantage over other countries."
Zong Wa, executive director of the Government-backed China Education Association for International Exchange, said the UK's share of the market would continue to drop unless it could show more commitment to guaranteeing quality. "Institutions coming here to make quick money are a problem," he said.
The British Council report shows a 4 per cent drop in the UK's share of a previously expanding market that has gone into reverse with a 2.2 per cent fall in Chinese student numbers overseas.
The new market leader is the US, whose intake has grown from 17 per cent to 19 per cent over the past year as the UK's has slipped from 21 per cent to 17 per cent. Australia's share has risen from 12 per cent to 15 per cent.
Jazreel Goh, director of education marketing at the British Council in China, said: "It is time for UK institutions to give something back and to be realistic with their annual budgets."
Yonglon Wang, chief representative in China for Hertfordshire University, whose Chinese recruitment numbers have dropped more than 50 per cent this year, said: "UK institutions cannot continue to expect such high profit margins in a maturing market."
Mike Shattock, visiting professor at the Institute of Education, London, said: "I don't think bankruptcies are going to come out of this. But some universities may have to reorder their finances."
Sir Howard Newby, chief executive of the Higher Education Funding Council for England, said 15 universities relied on overseas students for more than 15 per cent of their income.