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.
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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.