Should universities build campuses in the People's Republic or set up joint degrees with Chinese institutions?

Every week, it is said, a vice-chancellor of a British university flies to China with big pound signs in their eyes. They go there in search of Chinese students who are reputed to prize a British education and to be prepared to pay tuition fees that until a few years ago would have made the average English parent clobber Tony Blair.

But are British universities going about their Chinese adventures in the correct way? And, more to the point, are they going after the right goals?

Some experts believe not. But all are agreed that education is a key factor in the emerging power of the nation with the largest population in the world.

One of the big questions is whether British universities should set up outposts in China as a way of tapping into the rapidly expanding Chinese market – as universities in Nottingham and Liverpool have done – or whether they should be more modest and go for partnerships with Chinese universities. This issue arouses intense passions, visible yesterday at a private seminar organised by the new higher-education think tank Agora and the Adam Smith Institute.

"It seems to me that setting up overseas campuses is a strategic mistake," says Michael Shattock, who is currently writing a report for EUEREK (European Universities for Entrepreneurship) on the subject and who spoke at yesterday's seminar. "They are a leap in the dark, a diversion from what universities should be doing."

Professor Shattock, of London's Institute of Education, carried out a study of Nottingham's campuses in China and Malaysia two or three years ago, and more recently undertook an audit of the Australian Monash University's campuses. "The Nottingham campuses weren't breaking even," he says. "That was also true of Monash, both in Malaysia and South Africa."

Although Shattock acknowledges that his figures might be out of date – indeed, Nottingham says that it is now breaking even or making a small profit on its Malaysian outfit – he argues that there are acute difficulties in making overseas campuses work. That is because staff are often unwilling to travel to the other side of the world and you can only persuade them to do so by offering them temporary promotions.

Until now, British students have also been unwilling to make the journey to China, so exchanges have been few and far between.

"Universities have got to stick to their knitting," says Shattock. By that he means they should stick to their core purpose – to provide teaching and research on their original site.

Others are also sceptical. According to David Pilsbury, chief executive of the Worldwide Universities Network, setting up an offshoot abroad is risky. It is also a very 20th-century thing to do. "The 21st century is about relationships," he says. "It's about partnerships. If you look at the commercial world, there is no doubt that relationship-building and partnerships are the way forward, where people are combining their experience to create something that really does enhance their brand."

Andrew Colin, the chairman of Into university partnerships, agrees that overseas campuses in China are a gamble and says that this is because the universities are at the mercy of government whim.

"This is pioneering, gold-rush stuff," he says. "As long as you are useful, you will be there, but not otherwise. You won't be able to get a long-term commitment to enable you to have a long-term business strategy."

Andrew Halper, head of the China Business Group at Eversheds, believes establishing your own outfit in China can be expensive. "I advise companies that do deals in China," he says. "Setting up an offshoot is often a complicated way to proceed but I don't mean that as a criticism."

Unsurprisingly, this thesis is rejected by Nottingham and Liverpool.

Sir Colin Campbell, Nottingham's vice-chancellor, says developing nations trust universities that make a commitment and contribution to them: "We have a high degree of confidence in the financial sustainability of our overseas campuses, bolstered by a huge level of political support and investment from within each country. While still in its infancy, the Malaysia campus is performing strongly and the China campus, just a couple of years old, is meeting our expectations for performance."

At the same time, Sir Colin emphasises that these campuses are not all about money. They are also about promoting opportunities for staff and students across the globe. "It is about how best to create opportunity for talented people – whatever their nationality, culture or social status. "

According to Professor Drummond Bone, the University of Liverpool's vice-chancellor, the university it has set up in Suzhou is an attractive proposition, both for research and teaching. Moreover, the university's investment has been a fairly modest $2m, a sum that has come not from Liverpool's own coffers but from an American company called Laureate.

"There is no money that could have gone to Liverpool that has been channelled into China," Bone says. But Liverpool is in China not for the money, he says, but to get Liverpool's name into the international market-place.

The model many critics of overseas campuses favour is one developed by Queen Mary University of London, where two undergraduate degrees have been established in partnership with Beijing University of Posts and Telecommunications (BUPT), one of China's top universities.

These courses are unique: one is in telecommunications with business management, the other in e-commerce engineering with management and law. Such a combination of subjects is not available in China at the moment, which is why the Chinese government gave the go-ahead.

The development was made possible when the Chinese decided to allow universities to set their own fees for courses that introduced their citizens to important new subjects. Otherwise, undergraduate course fees are capped in China just as they are in Britain. Seizing a commercial opportunity, Professor Lin Jintong, BUPT's president, approached Professor Adrian Smith, Queen Mary's vice-chancellor, and the rest is history.

To date, 1,000 students have signed up. Eventually it is expected that numbers will expand to 2,000 – about 15 per cent of the university's student population. All teaching is in English and takes place in China, but the syllabus is based on Queen Mary's existing electronic engineering curricula: students receive a degree from each institution.

"It's a joint venture that is sustainable and has terrific intellectual content," says Professor Smith. "And it is generating graduates who will be useful to China. We have staff who go to and fro and one of the keys is that we are creating a group of Chinese academics here in London who are comfortable with both systems."

One of these is Yue Chen, 32, who came to London to study for a PhD in 2000, when partnerships between British and Chinese universities were merely a concept to the former Secretary of State for Education David Blunkett. Now they are flavour of the month – and Yue Chen has won a special commendation for her groundbreaking work in helping to set up the two joint degrees. She has also been made a lecturer.

"This partnership model definitely works," she says. The key to successful activity in China will be whether the initiatives last. David Pilsbury of Worldwide Universities Network thinks that not all will. When Chinese education becomes a true market, and when American universities enter the fray, quite a few of the British ventures could drop by the wayside.

The important thing, he believes, is for any activity to be a true partnership, and not simply a money-making vehicle. "I don't know for how many centuries we exploited China, but they're clearly not up for it again," he says.

Anglo-Chinese ventures

The University of Nottingham was first off the mark with its Ningbo campus, the brainchild of vice-chancellor Sir Colin Campbell, who jets out to China every two months. The venture is a partnership with the Zhejiang Wanli education group and there are impressive new buildings, modelled on those in Nottingham. The university will not say how much money it put into the project on the grounds that this is confidential.

Liverpool's offshoot isn't a campus, according to Professor Drummond Bone, its vice-chancellor. It is a new university and Liverpool has a 50 per cent share. It has put in $2m of investment, which came from the American company Laureate Education. The university has been going for a year and has 800 students to date, taking courses in electronics. It is expected to expand into business studies and urban planning soon.

Queen Mary has a partnership with Beijing University of Posts and Telecommunications to provide two degree courses in China taught in English in the areas of telecommunications, business management, e-commerce engineering and law. Students will get degrees from both universities. More than 1,000 students have been recruited to date and numbers are expected to rise to 2,000.