With a heavy reliance on a retail client base and local bank distribution networks, there is a proliferation of funds with small asset sizes in China, the organisation said; the large number – 1,372 at the end of September – explains why the average size of funds has fallen to RMB2.0 billion from RMB3.7 billion at the end of 2010. Over the same period, total assets under management in the funds have risen by only 13.8 per cent.

"Typically, zombie funds have consistently underperformed, had once taken the spotlight but saw low demand afterward, or were launched by lower-tier fund houses," said Evonne Gan, an analyst at Cerulli Associates.

In China, gaining huge assets during a market surge does not mean that assets can be retained. "In as short a period as six months, all gains can be erased and these funds lie virtually abandoned on the periphery of the mutual fund space, unwelcomed by both investors and distributors," Ken Yap, head of Asia-Pacific research at Cerulli, said in the same report.

The proportion of zombie funds jumped significantly from end-2012 to the third quarter of 2013. Qualified Domestic Institutional Investor funds are prominent among them. Half of the 74 QDII funds in the market have less than RMB100 million in assets and almost a quarter of them are below RMB50 million, but remain alive.