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Blackstone billionaire: I don't see an economic downturn anywhere on the horizon

Everett Rosenfeld
Adam Jeffery | CNBC. Tony James says stocks could see a bear market this year.
  • "The last crisis was a terrible crisis, but it was both a financial crisis and an economic downturn. Right now, I don't see any economic downturn on the horizon, so it will be a little while before I think you have that confluence of factors," said Tony James, executive vice chairman at the Blackstone Group.
  • On top of that, he said he does not see the same "kind of excess and lack of risk systems, and the interconnectedness" that characterized the global financial crisis a decade ago.
  • James described himself as an "optimist" on the subject of the ongoing U.S.-China trade war.

There's nothing on the horizon that's indicating the next financial crisis is going to happen anytime soon, according to Tony James, executive vice chairman at the Blackstone Group BX .

Roughly a decade after the last financial crisis roared across the global, the situation is "definitely safer" because banks are more sturdy, risk and compliance procedures are improved, regulators are more vigilant and businesses are less likely to be engaged in risky behavior, James said. In fact, there appears to be some time before a problem rears its head, he told CNBC on Saturday at the annual Singapore Summit .

"The last crisis was a terrible crisis, but it was both a financial crisis and an economic downturn. Right now, I don't see any economic downturn on the horizon, so it will be a little while before I think you have that confluence of factors," he said.

On top of that, James said he does not see the same "kind of excess and lack of risk systems, and the interconnectedness" that characterized the global financial crisis a decade ago.

Still, James — who reportedly has a net worth well above $1 billion — acknowledged that the nature of financial shocks means they are unpredictable, so it is hard to know when stresses building.

"That's one of the thing that makes crises crises: They always surprise you somehow," he said.

Many economists, analysts and executives have pointed to the ongoing U.S.- China trade war as a likely trigger for a global crisis, but James described himself as an "optimist" on that front.

"There are certainly rivalries between the countries, but I believe their mutuality of interest will, at the end of the day, mean they come to some kind of agreement," he said.

Washington and Beijing have already applied tariffs to $50 billion of each other's goods . The U.S. is also considering additional tariffs for which China has warned it would retaliate.

'A return to normalcy'

The Blackstone executive said much of the discussion at this year's Singapore Summit focused on how the shifting role of the U.S. in international relations is "terrible," but James countered that the rise of powers like China and the increasingly inward-looking America is really just a reversion to the historical mean.

"It's certainly scary, but one way to look at the world is that the last 70 years is a bit of an aberration. So, this may be a return to normalcy, not a change to normalcy," he said. "Pre-World War II, it was a multi-polar world where you had a number of global powers, and we're moving to that again."

On trade in particular, James said the U.S. had for decades espoused global commerce policies to encourage the rebuilding of developed areas like Europe and Japan and spur growth in other nations. Now that the goal has been met, it's reasonable to expect a change, he suggested.

"Seventy years in, those policies worked, but now the U.S. is struggling to keep up with the rest of the world, and the rest of the world doesn't want its unvarnished leadership anymore," he said. "So there's a re-calibration: The cost of the U.S. losing that leadership position and losing that economic superiority — so to speak — is a retrenchment, and they want level trade rules."

James said he thought trade rules could be altered without preventing any country from economically thriving.

A weakening yuan

As for China, the executive said Blackstone is "feeling undiminished enthusiasm" for Asia's largest economy — especially in light of its recent spate of reforms to open up the country's financial sector. The biggest risk his firm sees when evaluating the country, he added, is not necessarily trade spats or government resistance, but is instead currency.

"Obviously at this time there are some benefits for weakening the yuan, or allowing it to weaken, but at the same time that's a very delicate balance because if it goes too far, it can cause a stampede. It also, if it gets too weak, causes political issues in Washington, D.C.," he said.

"So I think China has done a very good job allowing it to weaken — it has come down somewhat," he added. "I suspect what's going on with trade — the strength of the U.S. versus the strength of China — it will weaken somewhat further, but I don't think it's going to be a big problem, I think they'll manage it well."

Still, he acknowledged, the value of any investments in China will take a hit in dollar terms if the yuan weakens, so his company has to keep in mind the outlook for the currency.



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