We'll be left in the soup if we take sea turtles for granted

The Chinese who study in the UK provide a vital source of income, so, Boris Johnson hears on his visit to China, we can't afford to be complacent

Ah," said the jovial Chinese don next to me, dressed with a kind of Californian casualness in jeans and a jacket. "Be careful!" He had that barking Chinese sense of irony. "Be careful what kind of students you get!"

We were talking about Chinese students who study abroad, the phenomenon that had brought me to the country. There are 53,000 such students in British higher education. When you consider that they are paying about £10,000 a head for the privilege of a UK-brand university, you can see that they are making a major contribution to higher education finance.

According to Universities UK, fees from overseas students outside the European Union contribute about £1.5 billion to UK higher education, or more than a tenth of the sector's budget. The Chinese, by some way, contribute the most.

China is potentially a vast market. No wonder UK vice-chancellors smack their chops at the mere mention of it - and no wonder British universities are fanning out over China boasting about what a UK degree can bring.

Zhang Lee, a senior official in the Education Ministry, told us that about 100,000 Chinese a year head overseas to study, but the total number of families who might send their children abroad is estimated at 20 million.

Zhang estimated the size of the Chinese middle class - rather modestly, I thought - at between 60 million and 100 million.

This represents a potentially phenomenal amount of money in fees, and the UK does pretty well already. We have about 14 per cent of the total market of Chinese students, compared with America's 16 per cent and Australia's 14 per cent.

Why is the UK so attractive, I asked Zhang. He did not give a particularly complimentary answer. US visas are too difficult to obtain, the quality of education in Australia is deteriorating, the history between Japan and China is bad, and other EU countries are not as welcoming as the UK. Still, he granted that UK universities had a good reputation.

And what kind of Chinese students go to Britain, I asked my Chinese friends. Chinese academics seem to have mixed feelings about these British enrolments. Such students are referred to as "sea turtles" - in Chinese, the word for someone returning from abroad sounds like "sea turtle".

The view is that students go to the UK because their families can afford it; and, though many are very bright, they are not all the cream of the intellectual crop.

If you can get into one of the top ten Chinese universities, such as Beijing Normal, Beda, Xinhuan, Fudan, Wuhan or others of the top rank, you are set up for life. You will acquire permanent guanxi - the all-important personal networks - with the elite of China.

But the Chinese entrance system is pretty mean and eschatological. At the age of 18, the entire cohort takes an identical exam called the gaokao , which is heavily biased towards maths. Put it this way, all you slack British humanities students: if you want to do well in the Chinese gaokao , and get into a good Chinese university, you need the equivalent of at least a B grade in mathematics A level.

About 5 million entrants pass the gaokao , and 3 million fail, and there are simply not enough places as yet at good Chinese universities. That is why relatively affluent parents are willing to pay such comparatively huge sums to send their children to the UK to study.

Britain needs these Chinese students, and we need to be careful that we do not put them off. I heard a lot of complaints about the visa requirement.

If you want to extend your visa for a further period of study, the fee is £500 - a pretty whacking sum for hard-pressed Chinese families.

Then there is the crime. One Chinese who had studied in the UK told me how shocked he was by his time in Nottingham. "This place is not at peace," he said, adding that he was amazed when his laptop was stolen.

Britain's crime-ridden image is ruthlessly exploited by our competitors.

There was recently an Asia-Pacific universities conference in Australia at which the various players touted their wares. "If your son or daughter looks different, and they get six bullets to the head from a plain-clothes policeman on the Tube, would you send them to London?" asked one Australian professor in what we must humbly accept is a pretty effective piece of negative campaigning.

The other problem is that we are in danger of charging too much. "We are at risk of pricing ourselves out of the market," says Ian Gow, the head of Nottingham University's Ningbo campus. "[Fees of] £11,000 or Pounds 12,000 for a course in computer science is too much."

We are trading on the Chinese willingness to pay for higher education, and it is not just the rich who pay. The relatives always contribute: parents, grandparents - sometimes even neighbours.

Under current rules, tuition fees should not exceed more than 25 per cent of a Chinese university budget. But Chinese higher education has been going through an expansion similar to that in the UK. There are 16 million Chinese students in full-time education - 23 million if you include part-timers. There are 1,792 Chinese state universities and about 1,250 community colleges, most of which cannot give out degrees. In some of the provincial state universities, the pressure of numbers is so great - and the corresponding fall in the unit of resource so acute - that students and their families are providing about 50 per cent of the institution's funds.

The sums involved are relatively tiny compared with the UK, but they show a cultural willingness to put the financial burden on the consumer of higher education - or rather, on their families - that does not exist in this country.

At present, thanks to the number of Chinese sea turtles in Britain, there are many well-off British students whose university education is being subsidised by the hard work and thrift of the incipient Chinese bourgeoisie. But there may come a time when the Chinese start to wonder why they are spending all this money on a British education when they could get almost as good an education far more cheaply in China itself.

That is partly why some of the most forward-looking British academics, such as Colin Campbell, vice-chancellor of Nottingham, have decided to set up campuses in China.

It is a brilliantly imaginative idea. In Ningbo, south of Shanghai, Nottingham has completed a building that shows not only signs of British influence - it is an exact replica of the main building of Nottingham University, faithful to the original in every respect except that the tower is slightly larger. On the campus, 56 British academics teach British courses in English, and students are charged about 50,000 yuan - ten times as much as a Chinese university but still far less than the cost of sending a child to Britain. Liverpool University is following suit, and there are all sorts of other tie-ins and link-ups.

The question is whether these UK-badged universities will start to undercut the UK's domestic market: will Chinese students who might have gone to Nottingham and spent a bomb on fees end up in Ningbo spending much less?

The academics at Nottingham think they have no option. They have to prepare for the time when, for one reason or another, far fewer Chinese come to the UK.

It is true that numbers are at an all-time high. But the number of new Chinese enrolments is down this year - by as much as 14 per cent.

China is already a net exporter of education: that is to say, more foreigners travel to China for university study than Chinese travel abroad.

There are more people studying the English language in China than there are native speakers of English in the world. One day, who knows, British students may apply to Nottingham Ningbo as their first choice.

Boris Johnson is Shadow Spokesman for Higher Education. His report on Chinese universities will be shown on BBC Two's Newsnight on May 11.