CHINA says Australian immigration restrictions on foreign students and the population debate have created a less welcoming environment.

International student numbers are expected to fall next year, the first time since the decade-long boom began, with at least two universities -- Monash and Macquarie -- admitting numbers could fall by 10 per cent or more.

China is by far our largest market, valued at $18.6 billion.

"Some of the lead indicators are that we are going to get a serious drop in Chinese numbers but how many at this stage we do not know and for how long is yet to be determined," Tertiary Education Minister Chris Evans told The Australian in Beijing.

"We are in the situation of an appreciating dollar and a very, very competitive market place with a very aggressive marketing campaign like we have not seen before from the United States."

Senator Evans is in China with four senior university administrators this week to try to better understand the causes of what is shaping as a funding crisis for the sector. Monash University two weeks ago said it would cut 300 jobs and $45 million from its budget and more are set to follow suit.

Tougher new graduate immigration rules, the strong Australian dollar, higher fees, slow visa processing, the collapse of some vocational colleges and increased overseas competition have combined to create something of a perfect storm for the sector.

Senator Evans said that he was still waiting to see just how big a hole the problem could blow in Australia education sector. "We have increased investment in universities and the indexation arrangements are about to start so we are putting more dollars into universities, but each university will have to manage its budget," he said. "The feedback from the Chinese has been on the appreciation of the dollar but I think there has been very strong increased competition from the United States."

Education agents in Beijing also said Australian universities had been greedy in putting their fees up every year, helping to price themselves out of the market. "With the onset of the global financial crisis, you have seen the US universities become much more active than they were before," Senator Evans said.

"The feedback is not so much about the migration changes but that the perception of them has fed back into the population debate in Australia -- a general sense that Australia has not been as welcoming as in the past."

Senator Evans has become the first education minister since Labor gained power in 2007 to visit a market that provided 27 per cent of all foreign students, as his predecessor, Julia Gillard, never visited while minister.