Engineering students from top UCs would rather stay in Silicon Valley than returning to China and they have no problem obtaining H-1B visas. In fact, I would say that rich Chinese parents would want their kids stay in the US rather than returning to China. That's why FCBs are scooping up homes in Irvine.
But the main point is, public universities are funded by tax payers, and funds are limited. It must come from somewhere, so a compromise is needed, whether it's international students or out of state students.