China Beats USA, India To Become World’s Wealthiest Nation; 68% Of World’s Wealth Lies In This Asset

A McKinsey & Co. report has found that global wealth tripled over the last 20 years.

China is the present leader in terms of wealth, now trailed by the US.

The US’ net worth more than doubled over the period to $90 trillion.

The report was compiled using national balance sheets of ten countries accounting for over 60% of world income.

China’s Ascent

In today’s age, global wealth is the highest it has ever been.

Net worth worldwide rose to $514 trillion in 2020, a huge leap from $156 trillion in 2000.

China has contributed almost one-third to the increase.

The country’s wealth, which was $7 trillion in 2000- the year before it joined the World Trade Organization, now stands at $120 trillion.

Top 10 Richest Countries In The World

1. China: $113 trillion
2. US: $50 trillion
3. Germany: $14 trillion
4. France: $14 trillion
5. UK: $7 trillion
6. Canada: $7 trillion
7. Australia: $7 trillion
8. Japan: $3 trillion
9. Mexico: $3 trillion
10. Sweden: $2 trillion

Distribution Of Wealth

Over two-thirds of the wealth of the top 2 richest countries are held by the richest 10% of households, a share that has been increasing.

68% of global net worth is stored in real estate.

The rest remains with infrastructure, machinery and equipment and, in a much smaller capacity, so-called intangibles like intellectual property and patents.

Financial assets are not counted here due to its liabilities.

Rising Property Prices A Major Concern

This meteoric rise in net worth during the 20 year period can be attributed to sharply rising property prices driven by declining interest rates.

With this, the rise in networth has outstripped the increase in global GDP.

This raises concerns over the sustainability of the wealth boom.

This is due to the side effects that inevitably come with net worth via price increases above and beyond inflation.

For the average citizen, increasingly costly real estate makes home ownership a distant dream.

Recession Coming To China?

It also heightens the risk of a financial crisis, such as the 2008 global recession which happened after the US housing bubble burst.

It seems China may also be headed that way considering the debt of property developers due to lower sales owing to high prices.

China’s Evergrande Group is one such example of how high property rates can lead to economic harm.

How To Avert Crisis?

What should happen to offset such threats for the future is redirecting global wealth to more productive investments that expand global GDP.

An eventuality of this is a collapse in asset prices that could erase as much as one-third of global wealth.

This would then bring it more in line with world income, thereby balancing the scales.