Australia's most populous state will ax a Chinese-funded education program that teaches Mandarin in schools amid fears over potential foreign influence.

The Confucius Institute program — administered by the Chinese government agency Hanban — teaches China's official language in 13 public schools across New South Wales (NSW).

However, the NSW government said in a review issued late on Thursday that, while it found no specific evidence of interference, it was improper for the program to continue.