Universities are more dependent on Chinese students than at any time in the past decade despite long-standing efforts to diversify, Education Ministry figures show.
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Eighteen percent of university students last year were from overseas, up from 13 percent 10 years ago, and 47 percent were from China, up from 29 percent in 2009. The figures included full-fee international students as well as PhD students subsidised by the government and others on aid schemes.
Tertiary Education Union president Michael Gilchrist said such a high level of foreign enrolment posed serious financial risks.
"There's the risk of shocks such as the Asian crisis or a financial crisis or bird flu or something like that.
"But the other one is the growth of capacity in China.
"It's just a matter of time before they rise up in the rankings and begin to retain many more of their students at home and maybe start attracting international students themselves.
"We've seen in Australia the consequences of over-reliance on overseas students. I think they got up to 25 percent-plus at one stage and were hit hard. I mean that caused a real crisis when those numbers dropped."
Mr Gilchrist said the government and universities needed to consider an upper limit on foreign enrolments so that institutions were less vulnerable to financial shocks if enrolments dropped suddenly.
He said a limit would also ensure institutions provided a high-value experience and were focused on domestic students.
Lincoln University had the highest concentration of foreign students last year at 35 percent, but its acting vice-chancellor Bruce McKenzie said he would be happy for it to go as high as 50 percent, a figure Lincoln has reached in the past.
He said there was a risk in focusing too much on one country, and Lincoln had been burnt that way before.
"There is a balance between income and risk. Lincoln University in fact in the mid-2000s had a very high percentage of students just from China and when that dried up it did put us in a financially difficult situation."
Dr McKenzie said universities were enrolling more students from a greater range of countries, but that diversification had not kept up with increased enrolments from China.
However, he said Lincoln had a more diverse intake than in the past and about half of its foreign students came from China.
"We're quite highly-diversified.
We have large numbers from China, large numbers from India, very significant numbers from Vietnam, Indonesia, Papua New Guinea, Malaysia and we have a surprisingly large number of study-abroad students from the United States."
The University of Auckland was the single biggest enroller of foreign students last year with 6265 full-time equivalents - 19 percent of its student body.
Vice-chancellor Stuart McCutcheon said enrolling from overseas did create financial risks but there were also risks from domestic enrolments.
"They might be general shocks such as some kind of epidemic, they might be country-specific issues. But I think it's worth remembering that you're also susceptible to shocks in New Zealand," he said.
Prof McCutcheon said institutions needed to consider the right mix of foreign and domestic students but they did not need to set a permanent upper limit.
"What we have to do, of course, is keep evaluating what the appropriate proportion of international students is."
At Massey University, 21 percent of the students were from overseas last year and 70 percent of that group were from China.
The student view
International students want a greater say in the institutions that are enrolling them.
The president of the New Zealand International Student Association, Lukas Kristen, said universities and polytechnics needed to include international students in their decision-making by allocating places on committees and boards.
"If there's growth we want it to be sustainable growth that is matched by growth in student support services and, also, student representation at different universities."
Mr Kristen said some universities already ensured international students were included, but others did not.
He said universities did not need to impose limits on their foreign enrolments.
"International students do look for the experience of interacting with domestic students and so at a certain threshold they will view that experience as being lost if we have too many international students, so I think it will just naturally taper out," he said.
Mr Kristen said enrolling large numbers of students from one country could be a problem if it was not managed well.
For example, Mr Kristen said he was aware of a student hostel that placed all its Chinese students in rooms on the same floor, instead of spreading them among other students.
He said universities should make sure foreign students had opportunities to interact with New Zealanders to prevent isolation.