You won't get any argument from me Franco on what you say here, but with the universities I think it is a case of 'don't bite the hand that feeds you' and in this case it is China. I'm sure our federal government is under the same pressure, given it/us/we, like many universities, have solicited such a strong trade relationship with China. Unfortunately it appears in modern society $ generally (it seems?) speak more than ethics/morals/values; so as it is appears to be how it will stay(?)
As for Chinese students dobbing in others to the CCP, well would we really expect anything different? I can't see any problem, (apart from a bit of financial pain to the university sector and those who have taken economic advantage of Chinese students in Australia), in not accepting foreign students into Australian Universities from non-democratic countries, but I'm sure others won't agree.
Oh wait, the CCP would object and impose more trade restrictions on Australia!