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Investing in China 'simply unsuitable': Analyst

Despite continued government intervention, China's Shanghai composite suffered its worst daily selloff in eight years to start the week.

That slide will only intensify if more investors start to lose faith in the government rescue measures already put in place, according to Evercore Macro Research analyst Donald Straszheim.

"There is a lot of stock that is still for sale," he said during an interview on CNBC's "Squawk on the Street." "That's why you have these down days if in fact Beijing is not intervening and buying stock."

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After seeing stocks tumble more than 30 percent, Chinese banks propped up equity prices in early July while regulators halted trading for many companies and even banned selling shares of larger firms. But many have criticized the intervention, citing a heightened sense to sell before more companies are halted.

"On July 4, the Shanghai, Shenzhen markets stopped being markets and became a government operation," Straszheim said. "Investing in China right now I think is simply unsuitable for foreign investors."

An investor stands in front of an electronic board showing stock information in Fuyang, China.
Reuters
An investor stands in front of an electronic board showing stock information in Fuyang, China.

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Nearly 20 percent of China's stocks were halted to start the week as selling intensified once again.

"Saying this is going to go up because we are going to make it go up ... is a massive mistake with important negative externalities longer term," he said. "But this is a symptom of a bad economy in China and that's what the foreign companies and domestics are getting hammered by."