Writing in the latest AMP Capital Insights paper, head of dynamic asset allocation Nader Naeimi noted the Shanghai Composite Index has suffered "sharp price falls" over the past month in the order of 30 per cent.
While investors who have been invested in the market for the past year have still generated returns of around 70 per cent, recent investors have suffered dramatic losses, Mr Naeimi said.
The Chinese government suspended trading on around half the stocks on the market on Wednesday.
The People's Bank of China has also announced it will directly assist the China Securities Finance Corporation, a provider of margin financing.
In addition, China's insurance regulator has given qualified insurers the green light to increase their ratio of equity assets to 40 per cent (up from 30 per cent) by purchasing blue-chip stocks.
All short selling has been banned, and the Chinese media has "rushed to reassure citizens", said Mr Naeimi.
"This is a significant price correction for the Chinese sharemarket [rather than] an ominous sign for China’s economic growth. It’s also important to remember that the Chinese sharemarket is characterised by more volatility than we’re used to in developed markets," he said.
Furthermore, the 30 per cent falls in Chinese equities are unlikely to have a more in-depth effect on the market, Mr Naeimi said.
Most Chinese retail investors only have 10 per cent of their assets in shares, he said – and the sharemarket sell-off is not showing signs of liquidity or banking stress.
In addition, China's central bank cut interest rates in June, which should support economic growth, Mr Naeimi said.
All in all, the recent crash in China's stock market should be seen as a longer-term buying opportunity for Chinese equities, he said.
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