CHINA'S influential ambassador to Australia, Zhang Junsai, is urging the federal government to manage its international education sector more effectively.

Stable policies and a stress on quality will bring students back, he said, even if costs rise.

Mr Zhang said that "each nation has its strong points and education is one of Australia's".

"But it should be better managed," he said. "It should be one of Australia's policy priorities.

"My view is that the export of education is closely related to your migration policies. Here, a stable policy is beneficial to both sides."

The most recent data from Australian Education International reveals that while the number of Chinese students starting courses in Australia continues to rise, the rate of increase is slowing.

Only the English Language Intensive Courses for Overseas Students sector has witnessed a drop in student commencements from China, from 4777 to 3907 in the year to July.

Enrolments in higher education increased by 6500 to 34,500, in vocational education and training by 500 to 14,910, and in non-award and enabling courses by 650 to 4347.

Mr Zhang said the highly publicised closure of several large private training providers had a "big psychological impact on Chinese students".

"This was poorly managed at the time, with more than 4000 Chinese students affected," he said.

However, action by state and federal governments to quickly address the issue had delivered a positive message, he added.

China has been the biggest source of foreign students in Australia in the past five years, with AEI data showing total enrolments across all sectors peaking at 71,700 in July.

However, numbers are expected to start declining.

Thomas Wang, manager of the Australian market at education agency China Star in Beijing, said he expected university applications from China to fall this year by between 20 per cent and 30 per cent.

Mr Zhang said the unstable policy environment coupled with the rise in the Australian dollar had a detrimental effect.

"But if you provide very good services, you don't have to worry whether students will continue to come. Quite a lot want to come here for the quality of the education, not for its price."

Mr Zhang said the lure of permanent residency was also a big attraction. "During an economic boom that's no problem, they can usually find a job.

"Getting permanent residence doesn't mean they will stay forever, becoming a citizen. But it does provide the opportunity for gaining work experience," he said.

"Their future is back in their own country, which is developing very fast and needs a lot of educated people."

Changing the rules around permanent residency was making potential international students think twice about coming to Australia.

"But a combination of the positive factors, especially stability, will attract further students to come to Australia," Mr Zhang said.