China's economic model is 'washed up on the beach' and it's not going to bounce back, veteran investor says

• Veteran investor David Roche told CNBC that China's economic model is "washed up on the beach."
• He doesn't anticipate it to bounce back as it deals with deflation, slowing growth, and other economic snags.

China's economy is facing a slate of obstacles ranging from a housing market slump to faltering trade, and veteran investor David Roche says the country's economic model won't be able to bounce back.

"The Chinese model is clearly washed up on the beach with a huge number of legacy holes in it, and it's not going to take off again," Roche, president and global strategist at Independent Strategy, told CNBC's Squawk Box on Thursday.

China slipped into deflation earlier this month, with the consumer price index dropping 0.3% annually in July, according to the National Bureau of Statistics. The People's Bank of China made a surprise rate cut on Tuesday, and policymakers are caught in the between stimulating the economy and propping up its weakening currency.

"They really don't have the approach to surgically get rid of bad debts and bad assets, and at the same time, they're not going to be able to rely on their traditional measures of growth," Roche said. "That's the big problem."

Most of China's issues are tied to its property sector. Real estate accounts for about one-fifth of the economy, and massive debts are weighing down top developers like Country Garden Holdings, which this month failed to make millions of dollars' worth of coupon payments on its bonds.

The troubled property market helps explain China's weak second-quarter GDP, which came in below expectations at 6.3%.

In any case, Roche added that the ripple effects of a slowdown in the world's second largest economy may not have been fully priced in, and he said that global markets could be failing to account for the key role of manufacturing in emerging market economies.