After unexpectedly cutting interest rates for the first time in two years, Chinese leaders have revealed their floor for economic growth is around 7 percent, said Stephen Roach, senior fellow at Yale's Global Affairs Institute.
The move also signals investors can expect further moves if China fears the growth rate will go appreciably below 7 percent, the former chairman of Morgan Stanley Asia said Friday on CNBC's "Squawk Box."
In a surprise announcement Friday, the People's Bank of China said it was cutting one-year benchmark lending rates by 40 basis points to 5.6 percent. It also lowered one-year benchmark deposit rates by 25 basis points. The changes take effect Saturday.
The rate cut is seen as addressing slowing factory growth and a stalled property market, which have dragged down the broader economy.
China is addressing cyclical changes while also fixing big structural issues in its economy, something that no other economy is doing right now, Roach said.