Mark Mobius, an American emerging markets fund manager, said China's crackdown on large technology companies may be advantageous to smaller rivals.

The founder of Mobius Capital Partners and market veteran said small to medium-sized companies in the technology, education, and medical industries sector will likely see increased growth prospects in the coming years as a result of the Chinese government's crackdown.

"What's happening is a good thing. What the Chinese government is doing is cracking down on the big companies that dominate various sectors at the exclusion of smaller companies. So the regulatory crackdown is probably, in the long run, going to be good for the Chinese market," Mobius said.

Chinese regulators have recently increased their scrutiny of major players in the technology sector. This included the imposition of new rules aimed at mitigating unfair and monopolistic business practices. The latest crackdown came during the weekend when regulators imposed new rules for private education companies and food delivery businesses.

Chinese regulators barred education technology companies from seeking capital through initial public offerings as a way to control "runaway capital." Regulators also imposed new rules governing food delivery service companies, which are now required to provide adequate compensation and insurance coverage to all their drivers. 

The crackdown has battered the stocks of some major companies, which has sent the MSCI China Index down to significant lows not seen since the 2008 financial crisis. The index dropped by more than 11% since the start of the week.

Mobius said major companies such as Alibaba Group and Tencent will be greatly affected by the reforms but smaller companies will likely thrive as a result. Mobius said he expects the selloff to extend by another 5% to 10% at most before investors realize that not all players will be affected.

"There's thousands of companies listed in China. It's a tremendous economy. There's no way any global investor can ignore China unless there's a complete embargo of the U.S. government against China. But that's very unlikely," he said.