A downturn in the number of students from China could be "catastrophic" for some Australian universities and may force taxpayers to prop up the budgets of some of the nation's oldest sandstone institutions.

Key points: In 2017, Australia's higher education sector generated $32 billion

In 2017, Australia's higher education sector generated $32 billion The University of Sydney tops the list of institutions dependent on fees from Chinese students — one fifth of its total revenue

The University of Sydney tops the list of institutions dependent on fees from Chinese students — one fifth of its total revenue Universities reject criticism they are overexposed to the Chinese student market

That is the warning from Salvatore Babones, an adjunct scholar at the Centre for Independent Studies, who likens the exposure of Australian universities to China's student market to the risks big banks faced during the global financial crisis.

"The risks are primarily financial," Associate Professor Babones said.

"Australian universities have treated Chinese students as the cash cows of the international student market. They've relied on Chinese students for their expansion and funding."

"Australian universities are extraordinarily exposed to the Chinese market, and by extraordinarily I mean that the Australian universities have a multiple of several times the number of Chinese students of any comparable university in the world.

"At these levels of exposure, even small percentage declines in Chinese student numbers could induce significant financial hardship as universities struggle to meet the fixed costs of infrastructure and permanent staff salaries in the midst of a revenue shortfall.

"Large percentage declines could be catastrophic."

Top Australian universities named

In a paper published today by the Centre for Independent Studies, Associate Professor Babones calculates the massive revenue reaped by top-tier Australian universities from international students.

The University of Sydney is atop the list, with fees from Chinese students totalling $500 million dollars in 2017 — or one fifth of its total annual revenue.

Australian universities are too dependent on Chinese students for revenue, according to Salvatore Bobones, an adjunct scholar at the Centre for Independent Studies. ( AAP: Dean Lewins )

The total stock of plant and equipment at Australian universities increased by almost 20 per cent between 2013 and 2017, while the University of Sydney's "key management personnel compensation" rose 74 per cent over the same period.

The University of Melbourne, Australian National University, the University of NSW, the University of Technology Sydney, the University of Adelaide and the University of Queensland are also all overexposed to the Chinese student market, according to Associate Professor Babones.

"If these were ASX-listed companies, the regulators would be all over them to diversify their risk, or at least divulge the risk," he said.

"But because they're public entities they're able to hide behind the shield of government and not let us know the risks they're taking, and not responsibly work to reduce them.

"In the global financial crisis in 2008 the world's governments bailed out the biggest banks because they were too big to fail. A failure in the bank would have caused a rupture in the financial system.

"Right now we have a problem where Australia's big universities are too big to fail."

"You can't let a major metropolitan university go bankrupt, but major metropolitan universities are trading on that knowledge.

"They are taking out loans and they're making long-term commitments to staff and to students based on projected revenues that at a moment's notice could disappear if there's a macroeconomic event involving China and the Chinese currency."

Students treated like cash cows

Abbey Shi is an international student studying arts and law at the University of Sydney. She said many Chinese families made huge sacrifices to send their children to university in Australia.

Abbey Shi says many Chinese families make large sacrifices to send their children to Australian universities. ( ABC News: Elena De Bruijne )

"I think, personally speaking, I'm really lucky that my parents don't have to make a huge sacrifice, but I know a lot of my peers studying in universities that their families do," Ms Shi said.

"Some of them have to sell their properties back in China in order to afford their kids to be studying in Australia."

But Ms Shi said students were not always well supported once they arrived at university in Australia.

"I think there is a point where Australian universities treat international students like cash cows on campus. They oftentimes offer little support on received education or in their life."

Universities reject criticism they are overexposed to the Chinese student market.

Universities Australia chair Deborah Terry said regulators had assessed the vast majority of Australian universities as being in a low-risk financial position.

"As not-for-profit public education institutions, our universities prudently manage taxpayer funds — and have extensive expertise in doing so," she said.

"Universities give constant and careful attention to future trends in student recruitment, and nurture diversity within and across regions, as part of their business planning.

"Australian universities maintain very high admissions standards and strong academic rigour — and those high academic standards safeguard quality and attract international students."

Federal Education Minister Dan Tehan said universities' financial position was strong.

"The department monitors the financial performance and position of each university on an annual basis," he said.

"The Government has been working with the sector to strengthen English language requirements for international students by tightening regulations, improving data capture and increasing the scrutiny of visa applicants' English language proficiency."

The regulator of Australian universities, the Tertiary Education Quality and Standards Agency (TEQSA), monitors universities' level of exposure Babones to the Chinese student market.

TEQSA chief executive Anthony McClaran said patterns of reliance on certain markets were one of the issues the regulator monitored when it conducted annual risk assessments of universities and other education providers, including private colleges.

"I think that we do occasionally see patterns of over-concentration either on international students generally or on students from one country, and in those circumstances we would always recommend diversification where possible," Mr McClaran said.

As of December 2018, Australia was hosting nearly 400,000 international higher education students.

International students account for roughly 25 per cent of all students on Australian university campuses, and approximately 10 per cent of all students now attending an Australian university hail from China.

The total number of international higher education students at Australian institutions has nearly doubled since 2008 and more than tripled since 2002.

Australia's higher education providers generated $32 billion in revenue in 2017, up from $19 billion in 2008.

Admission standards questioned

Exposure to single international student markets is not the only issue Associate Professor Babones identifies as a problem for Australian universities.

He alleges Australian universities "routinely compromise admissions standards to accommodate international students", with preparatory programs for students with lower English language skills functioning as a back-door entry for students who do not meet admissions standards.

His report reveals some sandstone institutions accept students who only have a partial command of the English language if they complete a preparatory program through a private provider beforehand.

The University of Sydney topped a list of universities dependent on fees from Chinese nationals. ( AAP: Paul Miller )

"Admission standards have been lowered in such a way that Australian universities make extra money by farming students out, often farming them out to private providers in order to let them get around the English language requirements that would ordinarily be in place for them to study for their chosen degrees," Associate Professor Babones's report said.

"What universities are doing now is recruiting less and less qualified international students in a mad effort to keep international enrolments growing and that's simply not sustainable."

Associate Professor Babones said universities should be required to report detailed student numbers by country, as well as implement plans to reduce their reliance on international students, and particularly students from a single country.

The University of Sydney said in a statement it maintained high entry standards and had put in place an income diversification strategy.

"We've already seen an increase in students from the USA and Canada and we're working to increase the number of our students from India and South-East Asia," a university spokesperson said.

A spokesperson for the Australian National University said it had always maintained "some of the highest English language and academic standards when it comes to admissions".

"The Australian National University is a research-intensive university and continues to secure half of its revenue from high-quality research activities and outputs."