China overtakes US as world’s richest nation as global wealth surges
Net worth worldwide rose to $514 trillion in 2020, from $156 trillion in 2000, according to the study. China accounted for almost one-third of the increase.
Global wealth tripled over the last two decades, with China
leading the way and overtaking the U.S. for the top spot worldwide.
That's one of the takeaways from a new report by the
research arm of consultants McKinsey & Co. that examines the national balance
sheets of ten countries representing more than 60% of world income.
"We are now wealthier than we have ever been," Jan
Mischke, a partner at the McKinsey Global Institute in Zurich, said in an
interview.
Net worth worldwide rose to $514 trillion in 2020, from $156
trillion in 2000, according to the study. China accounted for almost one-third
of the increase. Its wealth skyrocketed to $120 trillion from a mere $7
trillion in 2000, the year before it joined the World Trade Organization,
speeding its economic ascent.
Richest 10%
The U.S., held back by more muted increases in property
prices, saw its net worth more than double over the period, to $90 trillion.
In both countries -- the world's biggest economies -- more
than two-thirds of the wealth is held by the richest 10% of households, and
their share has been increasing, the report said.
As computed by McKinsey, 68% of global net worth is stored
in real estate. The balance is held in such things as infrastructure, machinery
and equipment and, to a much lesser extent, so-called intangibles like
intellectual property and patents.
Financial assets are not counted in the global wealth
calculations because they are effectively offset by liabilities: A corporate
bond held by an individual investor, for instance, represents an I.O.U. by that
company.
The steep rise in net worth over the past two decades has
outstripped the increase in global gross domestic product and has been fueled
by ballooning property prices pumped up by declining interest rates, according
to McKinsey. It found that asset prices are almost 50% above their long-run
average relative to income. That raises questions about the sustainability of
the wealth boom.
"Net worth via price increases above and beyond inflation is questionable in so many ways," Mischke said. "It comes with all kinds of side effects."
Surging real-estate values can make home ownership
unaffordable for many people and increase the risk of a financial crisis --
like the one that hit the U.S. in 2008 after a housing bubble burst. China
could potentially run into similar trouble over the debt of property developers
like China Evergrande Group.
The ideal resolution would be for the world's wealth to find
its way into more productive investments that expand global GDP, according to
the report. The nightmare scenario would be a collapse in asset prices that
could erase as much as one-third of global wealth, bringing it more in line
with world income.
No comments