CANBERRA (REUTERS) - One of Australia's most exclusive universities has called off a talk to students by the Dalai Lama, prompting accusations it is bowing to China which has branded the exiled Tibetan spiritual leader a dangerous separatist.

Sydney University, ranked in the world's top 50, cancelled the June visit by the Nobel Peace laureate to avoid damaging China ties, including funding for its cultural Confucius Institute, Tibetan activists and Australian lawmakers said.

"As a democratic country, we should be encouraging more open and frank discussion about the current situation in Tibet, not banning the country's spiritual leader from addressing students and staff at universities," said Greens Senator Sarah Hanson-Young, whose party wields the balance of power in the upper house of parliament.

Prime Minister Julia Gillard was heavily criticised for refusing to meet the Dalai Lama during a 2011 visit to avoid damaging two-way trade worth US$120 billion (S$148 billion) last year.

Ms Gillard this month led a trade delegation to meet Chinese Premier Li Keqiang, with both countries agreeing to a new strategic partnership including yearly talks between both leaders on foreign policy and economics.

China's human rights record in Tibet remains a controversial issue in Australia, a close US ally, and Sydney University's new Institute for Democracy and Human Rights organised an on-campus talk by the Dalai Lama during his 10-day visit.

This was overturned by a decision to move the event off campus after the university warned organisers not to use its logo, allow media coverage or entry to the event by free Tibet activists.

Emails from university Vice-Chancellor Michael Spence, obtained by Australian television, expressed relief at the outcome, with Mr Spence reportedly praising it as "in the best interests of researchers across the University".

A university spokesman said senior academic management never received an official request to host the Dalai Lama, but acknowledged a decision was taken to move the event.

"The university decided that there was a better way of doing it. A small group, a small section of the student body, was really not the best thing," the spokesman said.

Ms Kyinzom Dhongdue, a pro-Tibetan independence spokesman for the Australia Tibet Council, said the university had given in to China, which was a major focus of academic studies.

"They have compromised their academic freedom and integrity, and it also sends a disheartening message to the Tibetan people," she said.

More than 100 Tibetans have set themselves alight since 2009 in protest against Chinese rule, mostly in heavily Tibetan areas of Sichuan, Gansu and Qinghai provinces rather than in the Tibet Autonomous Region of China. Most have died.

A Chinese official last month accused the Dalai Lama of providing money to encourage people to set themselves on fire, and said they had evidence to prove the Nobel Peace Prize laureate was instigating the self-immolations.

China brands the Dalai Lama, who fled into exile in India in 1959 after an abortive uprising against Chinese rule of Tibet, as a separatist. The Dalai Lama says he is merely seeking more autonomy for his Himalayan homeland.