British universities must not treat Asian students as "cash cows", a think-tank warned this week, saying that the good reputation of UK higher education is at stake.

In a report on the challenges posed by China, South Korea and India, Demos warns that the UK must "wake up" to developments in Asian innovation.

It calls for more collaboration with these burgeoning economies - with the UK building a reputation for innovation and social good in areas such as climate change - rather than retreat into "techno-nationalism".

Universities are crucial to this collaboration, the think-tank argues, but their record is mixed. Between 1999 and 2005 the number of UK students from China rose by 735 per cent, from India by 343 per cent and from Korea by 79 per cent. "Yet while the numbers of Asian students is impressive, what the UK sometimes does with them is less so," it says.

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The report, which was supported by the Foreign and Commonwealth Office and involved extensive research in all three countries, says that interviewees - particularly those in India - complained of British universities treating foreign students as "cash cows" and creating "mass-produced degree courses".

In India, where many universities market themselves aggressively, one professor of entrepreneurship said: "There are a huge number of Indian students going to study ropy degrees in the UK.

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"Very few Indian students study at the good universities - there are only a couple of hundred at Cambridge. It is a danger and must be recognised as a major threat to the reputation of UK education in India."

Overall, the report details the dramatic growth in science and innovation across Asia, noting that last month the Organisation for Economic Co-operation and Development announced that China had moved ahead of Japan for the first time to become the world's second largest investor in research, spending Pounds 4.7 billion.

One of the report's authors, Charles Leadbetter, said: "Britain has a choice. Either we become a marginal science and innovation player in world terms, just as we have in the car industry, or we can take our lead from the City of London and become a global hub for cosmopolitan initiative.

"That means choosing our areas of specialisation, collaborating with others and placing ourselves at the centre of knowledge and innovation networks."

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The report was launched at a conference in London this week and timed with Chancellor Gordon Brown's visit to India.

Demos said that collaborations such as the UK-India Education and Research Initiative, a ?10 million scheme to increase research and education links, were the way forward.