The Education Bureau has said that students are not avoiding the DSE exams in favour of applying to foreign universities. A recent report revealed that about 5,000 fewer students are sitting this year's exam than last year.
Only 66,000 candidates have applied to take the university entrance exam, which will begin next month. This is down from more than 71,000 in 2013.
In an article published on the bureau's website last week, officials said the drop was because there are fewer students in Hong Kong's schools in general.
"The drop in DSE candidates [from 2013 to 2014] is not due to a lack of confidence in the new exam. It is predicted," wrote the bureau.
The percentage of students dropping out of senior secondary school education in Hong Kong has not changed. In fact, it is at about the same level as it was when the HKCEE and A-levels exams were used instead of the DSE, according to the article.
But James Lam Yat-fung, the chairman of the Subsidised Secondary Schools Council, doesn't agree. He said more parents are sending their children overseas to continue their education. This is because competition for university places is more intense since the DSE was introduced.
"Only 18 per cent of senior secondary school students can make it into local universities," Lam said. "Families with a better financial situation would rather not risk it. They have a better chance of getting into [university] overseas."