The city's top two universities have lost ground in the latest global university league table.
In the Times Higher Education World University Rankings  2012-2013 , the University of Hong Kong slipped from No34 to 35, and Hong Kong University of Science and Technology dipped from 62 to 65.
Peking University edged up three spots to 46, while Tsinghua University leapt 19 places to 52nd.
The survey predicts that mainland universities are set to advance further in the coming years, as institutions in the West are hit by government austerity measures.
Phil Baty, editor of the Times Higher Education rankings, said in London: "There is no question that the balance of power in global higher education is shifting. There is strong support for world-class universities in the East … in stark contrast, funding cuts are hurting the West."
The California Institute of Technology retained top spot in this year's Times Higher Education rankings. It was followed by Britain's University of Oxford and Stanford University, California, in joint second place.
Harvard University in Cambridge, Massachusetts, dropped two places to fourth.
Many Asian universities moved up the rankings, including two in Hong Kong.
Chinese University improved from 151 to 124, while City University rose from 193 to 182.
One of the biggest movers was Singapore's Nanyang Technological University, which rose from 169 to 86.
Seoul National University in South Korea saw its ranking rise from 124 to 59. The top-ranked Asian institution, the University of Tokyo, moved up from 30 to 27.
"Higher education in Asia is on the rise. The resources that have been put in are paying off," Baty said. But Hong Kong should protect "its fine tradition of academic freedom" in order to excel in higher education.
The annual survey on the world's mainstream universities weighs 13 indicators including teaching, research, the research income from industry and internationalisation.