Issue #011 | The Weather and the Climate

International demand, the predicament facing universities, and how the world values a degree.

09:00 New York · 14:00 London · 21:00 Beijing

At the end of April this year, The Velvet Scalpel examined the intermediary’s narrative drift from a single university policy in Issue #005, The Standard Acceptable. The publication promised to return to the case once the university released its 2025 annual report.

That institution, the University of Sydney, was anonymised in the earlier piece under the editorial convention used by the publication at the time. This issue names it, allowing readers to examine the case and its sources directly. Every source cited is on the public record.

Issue #011 keeps that promise. It takes the University of Sydney as its point of entry into a structural exposure shared by Australia’s research universities. It is a diagnosis, rather than the kind of autopsy this series usually performs. It also raises a broader question that has not yet been fully answered, one this publication invites readers to consider, discuss and help answer.

The accounts and the forecast

According to the University of Sydney’s 2025 annual report, released this May, the University recorded an operating surplus of A$194.1 million on a parent-only basis. That result included non-recurring items and philanthropic and investment income. Once these were excluded, its core teaching and research activities recorded an underlying operating loss of A$176.0 million. Investment income fell from A$518.3 million to A$283.5 million.[1]

The University’s overseas student revenue still grew in 2025, by 7.4 per cent, or roughly A$119 million.[2] The University nevertheless issued a warning.

In a joint message to staff, released on 19 May 2026 before the annual report was tabled in Parliament, Chancellor David Thodey and Vice-Chancellor Mark Scott wrote that the results “reflect the challenging financial environment in which Australian universities are operating, and the ongoing impact of federal government policy, changing international student demand, reduced public funding for research and increasing operating expenses on our bottom line”. They expected the shifts already experienced by other institutions in the sector to “materially impact our settings from 2027”. Separately, they identified the Chinese market, saying that the softening of demand “is a pattern we expect will continue to deepen in the coming years”.[3]

In other words, management was warning about risks that had yet to appear fully in the current accounts. “Our University is moving from a decade of year-on-year student and revenue growth to regulated student growth with softening demand in key international markets and increasing operating expenses.” The warning reflected a tighter regulatory environment and softer demand in the University’s main international source market.

Why issue such a warning while revenue was still rising? Because of the concentration of that revenue. In 2025, China accounted for 77 per cent of Sydney’s overseas student revenue, a figure the Auditor-General recorded as a concentration risk.[2]

The University’s 2024 annual report used the word fragility to describe its core operating model.[4] In May 2026, the joint message from the Chancellor and Vice-Chancellor described Australia’s higher education funding model as one that “remains unsustainable”.[3] This suggests that Sydney is facing not an isolated operating problem, but a difficulty built into the system.

The structure

Sustained operating pressure can eventually constrain research, staffing and the student experience. A university’s competitive position and future demand rest partly on these assets.

What Australian universities face is not only demand fluctuation in a single source market. The deeper constraint lies in the country’s funding structure. Higher education has long been treated as carrying both public and private benefits, with costs shared between government and students. Public sources account for roughly 55 per cent of Australia’s tertiary education funding, well below the OECD average of roughly 72 per cent.[5]

The income-contingent HECS-HELP system allows domestic students to defer their share of tuition and repay it through the tax system once their income reaches the relevant threshold. This arrangement reflects a policy logic that links part of the cost of higher education to the private returns graduates may later draw from it.

Under this funding settlement, Australian universities cannot rely on public funding alone to support all their teaching, research and day-to-day operations. This is especially true of research. Public and competitive grants do not cover its full cost, and the Group of Eight has stated that its members cross-subsidise research and part of their teaching from discretionary income, including international tuition.[6]

When international demand moves, what a university has to protect is therefore not only its intake. It is also the research, teaching and daily operation that this income supports. International fees have been covering part of a gap left open by the funding system as a whole, and no single university can fully absorb that gap by adjusting its intake and spending alone. This helps explain why the joint message accompanying the 2025 results applied unsustainable to the national model.

On the policy side, the National Planning Level for new overseas student commencements rose from 270,000 in 2025 to 295,000 in 2026, of which 196,750 were allocated to higher education. It will remain at 295,000 in 2027. Under the overall planning level, each university receives its own indicative allocation, linked to visa-processing priority.

On paper, this increases the number of new international students universities can accommodate. But the Australian Government said in July 2026 that, on current trends, actual commencements in both 2026 and 2027 would come in below the NPL, with 2026 down roughly 8 per cent year on year.[7] A higher planning level can accommodate more students, but it cannot guarantee that actual commencements will rise with it.

The umbrellas

Universities are well aware that the weather has changed, and they have put up umbrellas.

They engage with government and put forward policy proposals. They strengthen their ties with industry, alumni and overseas partners. They diversify their intake and build a more direct institutional presence in some source markets, including through Monash University’s campuses in Malaysia and Indonesia.[8]

These moves can place part of the delivery of education within the market itself and spread geographic and revenue risk. Offshore delivery also brings costs of its own, along with risks to quality control and to the brand.

Universities also work on how they present themselves: through notices on their websites, messages from chancellors and vice-chancellors, official social media accounts, and every email a student receives after enrolling.

But one question remains insufficiently answered. When a market’s understanding of the degree itself begins to change, how far can these measures reach?

Who values the degree?

A university can decide its admission standards, curriculum, assessment and the conditions under which it awards a degree. These make up the educational and certifying processes the institution directly controls.

What it cannot decide on its own is how much students and their families are willing to pay, what signal an employer reads in the degree, how intermediaries translate its admissions policies, how social media compresses and ranks information, or how the experience of one cohort of graduates enters the judgement of the next cohort of applicants.

A degree is a form of institutionalised cultural capital. Pierre Bourdieu observed that academic qualifications make their holders comparable and establish a conversion rate between cultural and economic capital. That rate is not fixed: its returns are affected by scarcity, and it may change in practice after the educational investment has already been made.[9]

Bourdieu also described the state as “the central bank which guarantees all certificates”.[10] Extending that metaphor across borders, as this publication does, reveals a particular feature of a degree earned abroad: it is awarded within one system, but often undergoes its main conversion within another system and labour market.

The Chinese market is a case in point. Between 1978 and 2025, about 87 per cent of Chinese students who completed their studies abroad returned home, on cumulative figures.[11] For these returnees, the degree is converted primarily into opportunity within institutions and a labour market that the awarding university cannot directly control.

The conversion rate is set, to a large extent, at the sites where the qualification is recognised and used in China. For applicants who use it, the qualification-recognition service of the Ministry of Education’s Chinese Service Center for Scholarly Exchange verifies whether a foreign qualification is genuine, lawful and able to be mapped onto the Chinese degree system.[12]

In Shanghai, a tiered settlement pathway introduced in June 2022 remains part of the current application framework. Graduates of universities on the recognised world top-50 list may apply directly for household registration after taking full-time work in the city, while those from universities ranked 51st to 100th may apply after six months of social-insurance contributions. The current official service guide lists this pathway under its incentive conditions and cites both the implementation rules in force since 1 December 2025 and the 2022 special-support notice as its policy basis. The recognised list is determined by the relevant authorities with reference to the Times Higher Education, U.S. News & World Report, QS and ARWU rankings, with the list in the official application system prevailing.[13]

Employers, public and private, participate in the same process through their hiring requirements and screening rules. They judge not only whether the university and field fit the role, but also what the degree is “worth” relative to the other qualifications on the desk. Families observe the signals from all three and take part in the valuation through the budgets they are willing to commit to overseas study.

Between the university and these sites of conversion sits a commercial channel, often remunerated through recruitment commissions. The narrative drift documented in Issue 005, in which an institution’s policy was rewritten as conversion-oriented copy, is one example of what this layer does. It shows the translation a university policy enters once it leaves the campus.

The intermediary does not manufacture devaluation out of nothing. It enters a market already highly sensitive to price, returns and scarce position. But what it chooses to repeat still shapes how that market understands a degree. Rankings, duration, entry thresholds, talent policies and salaries all fit into a comparison table, and all convert readily into anxiety and urgency. The value produced through teaching, research training and networks of relationships is harder to sell in equally compact form, and so it falls out of these narratives more easily.

The University of Sydney’s 2025 results passed through the same translation layer. Its underlying operating loss was presented as the University posting a “financial deficit” (财政赤字), being “driven into a corner” (被逼急了), and having to “lower the bar to compete for students” (放水抢人) by 指南者留学 on 18 July 2026. The same planning figure of 295,000 commencements was presented on 17 July as an “expansion dividend” (扩招红利), under the headline “the golden application window has opened” (申请黄金窗口已开启), by 江苏签务通出入境. The following day, 指南者留学 described it as evidence that the government was “dead set” (铁了心) on controlling numbers.[14]

The channel does not merely transmit policy. From its own commercial position, policy changes running in opposite directions can each be retranslated into urgency.

More importantly, this translation layer reveals a room, far beyond the campus, in which a university’s reputation is re-narrated and its degree re-priced.

The underlying capabilities represented by a degree, including its teaching, research training and academic formation, may remain fully intact, and may even be improving. Yet the market may no longer recognise those capabilities in the same way, or grant the degree the scarce positional advantage it once carried.[15]

Real capability and recognised value do not always move together. The university still decides what is taught, what standards students must meet, and who receives the degree. Once that degree crosses a border, employers, governments, families and intermediaries all have a hand in deciding what it is worth.

Weather and climate

Weather is short-run variation: a national economy turning down, a visa regime tightening, or a market suddenly rising. These are external variables a university can hardly control. An Australian university cannot set the overseas-study budget of families in another country, determine how restrictive its own government’s policy settings will be, or fully control demand in any foreign market.

The universities have seen the weather, forecast more of it, made strategic shifts in response, communicated their situation candidly, and reminded their members to have umbrellas ready. The weather may yet change. Demand from China may recover. Demand from India and elsewhere may grow. Regulation may become less restrictive.

What universities can do has already been described: manage revenue and spending, diversify their sources, protect their most important research assets and the daily operation of the institution, and wait for clearer skies. They are already doing this.

Climate is the deeper and slower environment: how a society comes to understand, over time, what a university is worth. It includes how employers view the value of a degree, how intermediary narratives and social media reshape its meaning, and how, in a new technological environment, the public’s basic understanding of higher education begins to shift.

No university can decide these things on its own, yet every university is deeply affected by them. More importantly, the weather happens within the climate.

The local weather differs from one university to the next. The climate is shared, but it does not produce identical consequences at every institutional position. A university can outperform its peers while remaining highly exposed to the same source-market risk, and still need to be ready for wind and rain.[16]

People see the wind and rain, but can easily overlook that the monsoon carries moist air from the sea onto the land, creating the conditions in which they form. Climate does not explain every storm, but it shapes the conditions in which storms become more frequent, more severe or harder to recover from.

A society’s view of higher education, and the slowly settling consensus on whether a degree is “worth it”, form a climate of this kind. It is not a gust of wind that passes, but an environment formed over time.

What universities face, then, is not only one sudden storm, but a climate that is slowly changing. It acts not only on the weather in the Chinese market, but also on the weather in India, across African source markets, and among domestic students.

The question

The question this publication would put to higher education is this: while the sector manages the weather, should it also begin to discuss the climate itself?

More concretely, in each source market, who is deciding what a university degree is worth? Through which people, platforms and commercial interests does the institution’s account of its own value pass before it finally reaches students and their families?

Sutong

The Velvet Scalpel

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Notes

1. University of Sydney, Annual Report 2025, pp. 90–91: parent-only operating surplus of A$194.1 million (2024: A$545.3 million); underlying operating loss of A$176.0 million (2024: A$68.6 million); investment income of A$283.5 million (2024: A$518.3 million).

2. Audit Office of New South Wales, Universities 2025, tabled in the NSW Parliament, 11 June 2026: University of Sydney overseas student revenue increased by 7.4 per cent, or roughly A$119 million; China accounted for 77 per cent of the University of Sydney’s overseas student revenue and 78 per cent of UNSW’s, recorded as a concentration risk.

3. David Thodey and Mark Scott, “Our 2025 Annual Report and financial results”, University of Sydney, 19 May 2026.

4. University of Sydney, Annual Report 2024: the joint foreword by the Chancellor and Vice-Chancellor described regulation as amplifying “the fragility of the University’s core operating model”.

5. OECD, Education at a Glance 2025, Australia country note: public sources accounted for roughly 55 per cent of Australia’s tertiary education funding, against an OECD average of roughly 72 per cent.

6. Group of Eight, submission to the Draft International Education and Skills Strategic Framework: research grants typically cover less than half the full economic cost of research; international tuition cross-subsidises research and part of domestic teaching.

7. Australian Government Department of Education, Indicative allocations for higher education new overseas student commencements 2026: the 2026 NPL was 295,000, of which 196,750 were allocated to higher education; each provider received an indicative allocation; the 2025 NPL was 270,000. Jason Clare MP, “Managing a sustainable international education sector”, Ministers’ Media Centre, 3 July 2026: the NPL will remain at 295,000 for 2027; on current trends, commencements in both 2026 and 2027 will come in below the planning level, with 2026 down roughly 8 per cent year on year.

8. Monash University, “Our history”: Monash University Malaysia was established in 1998 as Monash’s first campus outside Australia. Monash University, Indonesia: opened in 2021 as the first foreign university to operate a local campus in Indonesia.

9. Pierre Bourdieu, “The Forms of Capital”, trans. Richard Nice, in John G. Richardson (ed.), Handbook of Theory and Research for the Sociology of Education (Westport, CT: Greenwood Press, 1986), pp. 241–258, esp. p. 248: academic qualifications as institutionalised cultural capital; the conversion rate between cultural and economic capital; and the effects of scarcity and subsequent changes in that rate.

10. Pierre Bourdieu, “Social Space and Symbolic Power”, Sociological Theory, vol. 7, no. 1 (Spring 1989), pp. 14–25, at p. 22: “The state thus appears as the central bank which guarantees all certificates.” The reading of a foreign degree as awarded within one system and converted within another is this publication’s cross-border extension of the metaphor.

11. Ministry of Education data, as reported by CCTV News, 12 April 2026: between 1978 and 2025, of some 8.01 million Chinese citizens who completed a course of study abroad, about 6.98 million returned, over 87 per cent. Cumulative figures.

12. Chinese Service Center for Scholarly Exchange, Ministry of Education, Measures for the Recognition of Foreign Academic Degrees and Qualifications: recognition is applied for voluntarily and verifies the lawfulness and authenticity of a foreign qualification and its correspondence to the Chinese degree system.

13. Shanghai Municipal Human Resources and Social Security Bureau, policy Q&A on the 2022 talent-support measures, 13 June 2022: introduced the top-50/top-100 pathway and stated that the recognised list is determined with reference to the Times Higher Education, U.S. News & World Report, QS and ARWU rankings, with the list in the application system prevailing. Shanghai Municipal Talent Work Bureau, Implementation Rules for Returned Overseas Students Applying for Shanghai Permanent Household Registration (沪人才规〔2025〕3号), in force from 1 December 2025 to 30 November 2030: the rules themselves do not set out the top-50/top-100 tiers. The current Service Guide for Returned Overseas Students Applying for Shanghai Permanent Household Registration, accessed 22 July 2026, retains the tiered pathway under “Incentive Conditions” item (4) and cites both the 2025 implementation rules and the 2022 special-support notice as its policy basis.

14. 指南者留学, “学费暴涨30%，澳洲变‘贵州’？澳八大集体放水抢人，申请量却连连暴跌，澳洲这次真急了……”, WeChat official account, 18 July 2026 (“放水抢人” in the headline; “铁了心”, “被逼急了” and “财政赤字” in the body, pp. 4–5 of the archived copy). 江苏签务通出入境, “2026澳洲留学官方新政全解读｜配额扩招 + 签证提速，申请黄金窗口已开启”, WeChat official account, 17 July 2026 (“申请黄金窗口已开启” in the headline; “扩招红利” in the closing section). Both posts were archived by the author as PDFs on 21 July 2026. English translations are the author’s. A third post reviewed as contextual material, but not quoted in the body, was 点滴留学, “2026 澳洲留学重大变革：审核、工签、费用、录取全新规则！”, WeChat official account, 29 June 2026.

15. Fred Hirsch, Social Limits to Growth (Cambridge, MA: Harvard University Press, 1976): positional goods.

16. Audit Office of New South Wales, Universities 2025: China accounted for 78 per cent of UNSW’s overseas student revenue; in the same year, UNSW’s overseas student revenue increased by 22.6 per cent, among the fastest rates in the state.