Cerulli Associates, the research firm, believes that there is unlikely to be a rush to eradicate so-called 'zombie funds' in China when new rules to encourage small funds to be restructured or liquidated come into force.

The China Securities Regulatory Commission has ruled that fund management companies running any mutual fund with less than RMB50 million ($8.1 million) in assets for 60 days in a row have to show it that they can sort out the problem by coming up with 'feasible solutions' that may include liquidation.

China is enacting these reforms to attract more international capital and to make its financial markets less rigid, Cerulli said.

The issue of funds that are so small that their costs far outweigh any benefits to high-net-worth clients is not exclusive to China. For some time, for example, policymakers in the European Union have sought to encourage fund firms to amalgamate funds to capture economies of scale and cut fees to end-users, not least through the use of Undertakings for Collective Investment in Transferable Securities (UCITS) that can be bought and sold throughout the half of Europe in which the EU operates.

The consultancy does not expect a raft of 'zombie fund' closures to happen soon. "We don't expect a glut of terminations in the immediate term due to the FMCs' general reluctance and their unspoken desire to ensure capital protection for investors during fund closures," says Felix Ng, a senior analyst at Cerulli.