As an Australian I'm not aware of this, I was speaking in terms of American universities as a whole. Fewer Chinese enrollments would mean fewer enrollments overall, and less money flowing into the university system (which assuming it isn't all squandered on admin, would reduce research output).

They're probably turned down because they aren't good enough for scholarships and they don't have the money to manage without any aid.

It might also just mean decreasing the quality of the student body. Which means instructors either decrease the quality of education provided, or else fail a bunch of people out (not exactly doing those people a favor...)

I don't it's prime facie factual that that admitting fewer foreign students is necessarily a good thing for domestic students.

Let's lower the standards for out top universities. I'm sure that will not backfire ..

There are only so many seats available for local students made available by government funding.