Stephen Schwarzman, the billionaire co-founder of investment powerhouse Blackstone, told CNBC on Tuesday that China knows it must change its trade and business practices but it's reluctant to do so because of the spoils it's reaped by protecting its economy.

"China in the last 40 years had more growth, I think, than any country in history. It's an astonishing miracle what they did. But they did it behind tariff walls. They did it behind markets that are not accessible. They did it with other approaches to intellectual property than are shared in the developed world," said Schwarzman. "So their desire to give all that up and their growth rate is obviously low."

Schwarzman, whose business interests and philanthropic efforts forged strong relationships in China, said he believes Beijing "recognizes that everybody going their own ways, U.S. and China decoupling," their massive economies is not good for them. "It's going to slow the whole world. So it's time to get together," he added.

China said Tuesday that "vice ministerial" officials will be in Washington this week to lay the groundwork for higher-level talks next month, aimed at ending the yearlong trade war between Beijing and Washington, which has resulted in billions and billions of dollars in import tariffs on both sides and more to come.

In Tuesday's "Squawk Box" interview, Schwarzman said he's encouraged by the approach to restarting the latest round of trade talks, predicting that this week's meetings should give U.S. negotiators a firm understanding of where China is coming from and visa versa.

Western developed economies, including the U.S., have been disadvantaged by the way China has emerged as a global superpower, said Schwarzman, who led the now-disbanded Strategic and Policy Forum, which was a group of CEOs who advised President Donald Trump.