The University of Hong Kong has fallen more than 20 places over the past four years on a list ranking the world's top 200 universities.
Once ranked the best university in Asia, HKU dropped to fourth in the region - losing out to institutions in Japan, Singapore and Australia, according to this year's World University Rankings released today by Times Higher Education.
The news comes a day after the South China Morning Post published an interview with University of Science and Technology (HKUST) president Tony Chan Fan-cheong, in which he warned local universities that they faced growing competition and needed to fight for more cash and support from business, saying: "We have to keep running to stay in place."
Although it is still Hong Kong's best performer, the 102-year-old HKU now stands at 43 in the world, down from 21 just four years ago when the rankings were inaugurated.
Phil Baty, editor of the survey, described the university's fall as "significant".
However, Baty said that the change was not so much a result of HKU suffering a decline in its standards, but the fact that the university's competitors had outpaced it.
"It's more of a case of it standing still," said Baty.
In comments that echoed Chan's words, he added: "HKU doesn't seem to be competitive on working with industries ... It has fallen behind the other universities in those regions because money has been spent more heavily on them."
In terms of sourcing funding from business, HKU scored 57 points out of a possible 100 in the rankings list.
An HKU spokeswoman said: "The latest list will serve as a general reference for us. We will continue to strive for excellence in teaching, learning and research."
HKU announced on Monday that Professor Peter William Mathieson, currently dean of medicine and dentistry at the University of Bristol, had been recommended by an 11-member selection committee to succeed Professor Tsui Lap-chee, whose term of office ends in February, as HKU's new vice chancellor.
City University of Hong Kong, ranked 182 last year, fell out of the league table in the Times Higher Education rankings altogether.
However, HKUST rose eight places to 57 and Chinese University climbed 15 places to 109. Both were found to have done better in sourcing funding both from business and academic citations.
A government spokesman told the Post it had set up a HK$23 billion fund for research in local universities and put in place a funding of HK$50 million to support institutions' effort in research transfer and collaborating with industries.
The Times Higher Education list uses 13 indicators to assess universities in areas such as research income, income from transferring research into industries, the learning environment, citations per paper, reputation and the number of international students and staff.
Additional reporting by Raymond Li