China crisis hits the campuses

In this group are 20 from China, who come via a partnership with Dong Cheng technical vocational school in Beijing. These students spend two years in China studying English and other subjects before arriving in Derby to join the HND programme. "Each year we get modest numbers from Dong Cheng," says Professor John Coyne, the vice- chancellor. "They get their visas, they come here, and they do well."

But this year, for no apparent reason, he says, something went wrong with their visa applications. "Two-thirds had their visas refused," he says. "We don't know why that happened. People say it's to do with the fact that the British embassy in China moved to a paper-based system for visa applicants, requiring information to be presented in a particular way. But it's all hearsay."

To try to get to the root of the matter, he dispatched to Beijing a member of staff, who has yet to report back. The loss of a dozen students from this programme is deeply worrying, though not catastrophic, because Derby does not rely on overseas students. Altogether, the university is 50 down on the number of foreign students it might have expected to get this autumn - 350 as against 400. "I can live with that, but I feel for my colleagues who have built their plans on larger figures and found they have not come through," says Coyne.

Higher education is a £10bn business to the United Kingdom's export market. In his first government Tony Blair championed a big push to attract overseas students to British universities. This initiative was based not only on the income that overseas students bring - in fees, rent, food and CDs - but also on the notion that it is in the UK's strategic interests to educate people from abroad because they go home and promote Britain.

His initiative bore fruit. Thousands of overseas students flocked to these shores. But this year the stream appears to have been checked. Other vice- chancellors are reporting similar dips to Derby's. Professor David Eastwood, the vice-chancellor of the University of East Anglia, says that his university's decline in overseas students will mean a loss of £1m.

Essex is also reporting a fall. Southampton Solent University says that it is about 10 per cent down, from around 300 students to 220. "The main reason is that Chinese numbers have dropped by about three-quarters," says Roger Brown, the vice-chancellor.

And this is happening for a mixture of reasons, he says. First, the government has tightened up on visas and entry clearance since the attack on the World Trade Centre in September 2001 and the London bombings in July 2005. And second, China is becoming more self-sufficient in higher education.

"Without the income from overseas students, our higher education system would be bankrupt - quite literally," says Brown. "It would be financially bankrupt and academically bankrupt. Many science departments would not have students because they rely on people from overseas to keep the numbers up, and the universities would not be able to balance the books."

The new universities are so worried that their umbrella group, Campaigning for Mainstream Universities, has made representations to the government. In particular, it has complained about bona fide students being refused visas on spurious grounds, such as entry clearance officers not believing they have the right qualifications.

Baroness Blackstone, the vice-chancellor of Greenwich University, recalls a horror story last year when overseas students destined for her university were sent back at Heathrow. "We also heard of officers turning down students for visas because they said they could do similar courses in their home countries," she says. "That is a completely invalid judgement to be making."

Greenwich's overseas student numbers are slightly down on last year's, according to Blackstone, but like most universities, it has not made a final tally yet. Other London universities claim that their overseas student numbers are not dropping. They include the University of East London, London Metropolitan University and University College London. Westminster University says that it will probably meet its targets, too.

But UEL's vice-chancellor, Professor Mike Thorne, says: "There has been meltdown this year. Behind this lies the new visa regime. People, particularly in China, don't like the new visa charges."

Old universities are not immune from the vagaries of the marketplace. Warwick, one of the universities with a very large overseas contingent, has suffered a decline this year in undergraduate intake, down from 599 to 573 students, although postgraduate numbers are up. The number of Chinese students at Warwick has fallen from 154 to 122, a drop that is more than compensated for by increases from Hong Kong, India and Malaysia.

Birmingham, another big player in this marketplace, is also expecting a drop in overseas undergraduate numbers, according to its vice-chancellor, Professor Michael Sterling. And the department of engineering looks as though it is suffering more than others, he says. The cause of the decline is China.

But Nottingham, the university with the highest overseas student numbers, is breathing a sigh of relief that it has met its targets and exceeded last year's figures. "We have never had a tougher year," says Christine Humfrey, the director of Nottingham's international office. "The difficulties have been caused by the strength of the pound, the uncertainty engendered by terrorism and the London bombings, and perceptions about visas."

None of this anxiety surprises Sir Howard Newby, the chief executive of the Higher Education Funding Council, who says the Chinese market was bound to cool because many of the students were lecturers taking PhDs to update themselves for China's entry into the global higher education marketplace. Now they have acquired those doctorates they don't need to travel to the West for education any more.

Dominic Scott, the director of UKOSA, the overseas students' association, watches the global marketplace closely. He says that the introduction of new immigration measures for foreign students have had an effect. They include leave-to-remain charges brought in 18 months ago (and doubled six months ago), the hike in the visa charge from £36 to £85, and the discussion about abolishing the right to appeal.

Moreover, the new paper-based application system in China has led to a rise in rejections. Scott hopes that the planned second phase of the PM's initiative, which is due to come in from 1 April 2006, will revive British fortunes in the marketplace. America and Australia have raised their game in recent months. The US, in particular, has relaxed immigration regulations following the drop in overseas students that followed 11 September. So, if the UK launches a new promotion campaign and reforms its immigration system for students, as the government is proposing, the expectation is that numbers could be stabilised.