Last month on the eve of Chinese New Year, a week-long holiday in mainland China, AMAC said it was raising the bar with new risk management and qualification requirements.

There would also be penalties for tardy information disclosures and an obligation for new fund managers to obtain a legal opinion endorsing their operations - all with immediate effect.

The association said it would revoke the licenses of fund managers if they failed to launch products by two separate deadlines in May and August, sparking a race to save registrations, according to market participants.

"The new rules are going in the right direction, but the problem is that they were published just before Chinese New Year with immediate effect and short compliance deadlines," said Ying White, a partner at law firm Clifford Chance's China office.

"So there hasn't been much time to get to grips with them, and there is still a lot of ambiguity in the rules."

Although the rules spell boom times for lawyers, who can charge up to 100,000 yuan ($15,000) for a complex legal opinion, market insiders said they expect as many as 12,000 fund managers to de-register or be shut down.

Several managers listed by AMAC as having no products told Reuters they were working on new products in a bid to save the registration.

"We are aware of the new regulations," said an employee at Shandong Province-based Ocean Brightstone Industrial Fund Management, who did not give their name. "We have new private fund products that we are currently working on."

Talent Dearth

A new requirement for senior executives to have fund management qualifications and experience is also proving tricky, because there is not enough talent to go round, said one Shanghai-based banker who helps set up hedge funds.