Reds manager Brendan Rodgers has significantly strengthened his squad in the summer transfer window, including the £32.5m signing of Christian Benteke.
Liverpool finished sixth and eight points behind fourth-placed Manchester United last season after a disappointing Premier League campaign.
But retired Reds goalkeeper James is optimistic the Merseyside outfit can challenge another of his former employers City for the final Champions League spot this term.
“I genuinely think if you look at the current top four, the ones who have given me the most concern are Manchester City,” BT Sport pundit James told The Sport Review
“That’s the place Liverpool have to be aiming to take. It is almost unforeseeable that Manchester City wouldn’t finish in the top four with the amount of money that they’ve spent.
“It is what we love about this game. I look at Arsenal being very good but not good enough to win the league. Manchester United are serious contenders for Chelsea. Liverpool have got to aim at fourth – fifth isn’t good [enough].”
Liverpool start their Premier League campaign with a trip to Stoke City at Britannia Stadium.
BT Sport 1 has the first game of the new Barclays Premier League season with Manchester United v Tottenham Hotspur this Saturday from noon, the first of 38 exclusively live Barclays Premier League games this season on BT Sport. This season BT Sport Europe is the new home of European football with all UEFA Champions League matches and UEFA Europa League matches exclusively live, visit btsport.com/europe.
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