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Chinese universities improved in this year's world university rankings, while the United States held all of the top-three spots, with Harvard, Massachusetts Institute of Technology, and Stanford taking first, second and third place respectively.
Cambridge and Oxford in the United Kingdom retained their fourth and fifth place global standings respectively, according to the Centre for World University Rankings, or CWUR.
China's Double First-Class University Plan, aimed at creating a group of elite universities with esteemed disciplines by 2050, is pressuring the US and UK, reported The Times newspaper.
Even though the US secured eight of the top-10 spots, 80 percent of US universities dropped down in the rankings.
Nearly 60 percent of the leading universities in the UK have dropped in the global rankings as they battle to retain their global prestige.
China has invested heavily in higher education, and 96 percent of its universities have risen in the standings, with Beijing's Tsinghua University leading the way at No 44.
The C9 League, China's version of the US Ivy League, also saw all nine of its institutions rise in the rankings.
Researchers at the United Arab Emirates-based CWUR, explained that the UK's position had diminished due to increased competition from global markets.
Nadim Mahassen, president of the CWUR, said: "While the results of this year's study confirm that the United Kingdom has an outstanding higher education system, the broader story for the nation is concerning, with nearly 60 percent of UK universities falling down the standings due to intensified global competition from well-funded institutions, particularly from China.
"Efforts must be made to ensure that the UK continues to attract top academics and students, that increasing enrolment numbers at universities come alongside increases in teaching capacity, and that tertiary education expenditure as a percentage of the national GDP steadily grows in the years to come."
The CWUR ranks universities according to quality of education and faculty, employability, and research output. UK universities performed poorly in areas like research and the number of graduates taking up executive roles in major companies.
Quoted in The Daily Telegraph newspaper, Irene Tracey, vice-chancellor of Oxford University, said that "significant investment and support given by countries like China" was the likely reason for some UK institutions falling down the rankings.
"We are in a global race, and unless we meet this challenge, UK universities' position as a science powerhouse and a key export is at risk," she added.
A total of 20,531 universities were ranked worldwide, with 95 countries represented in the Global 2,000 list. The US counted 16 of the top 20 universities, while in the UK, after Cambridge and Oxford, the leaders were University College London, Imperial College London, King's College London, Edinburgh, Manchester, Birmingham, and Bristol, which all featured in the global top 100.
Overall, the UK fared better than France, Germany and Japan, with four of the top 10 institutions and nine in the top 50, which is two more than France.