China overtakes US to take top spot in list of richest countries, global wealth triples over last two decades
As per a new report by the research arm of the consultants McKinsey & Co, in both US and China- the world’s biggest economies- more than two-thirds of the wealth is held by the richest 10% of the households and as per the report, their share has been increasing.
The Global wealth has tripled over the last two decades with China overtaking the United States for the top spot worldwide. The results are one of the takeaways from a new report by the research arm of the consultants McKinsey & Co. that has examined the national balance sheets of the ten countries representing more than 60% of the world income.
Jan Mischke, a partner at the McKinsey Global Institute in Zurich said that the world is now wealthier than it has ever been.
As per the latest study, the net worth worldwide has risen to $514 trillion in 2020, from $156 trillion in 2020. China has accounted for almost one-third of the increase as it wealth skyrocketed to $120 trillion from a mere $7 trillion. It was the year before it joined the World Trade Organisation, speeding its economic ascent.
Richest 10% of the world: Key details
• The United States, held back by more muted increases in its property prices, saw its net worth more than double over the period, to $90 trillion.
• In both US and China- the world’s biggest economies- more than two-thirds of the wealth is held by the richest 10% of the households and as per the report, their share has been increasing.
• According to McKinsey, 68% of the global net worth has been stored in real estate. The balance has been held in such things as machinery, infrastructure, equipment, and the intangibles such as patents and intellectual property.
• Financial assets have not been counted in the global wealth calculations as they are effectively offset by liabilities.
Global wealth triples over last two decades: What can be the side effects?
The rise in net worth over the past two decades has outstripped the increase in the global Gross Domestic Product. As per McKinsey, the asset prices are almost 50% above their long-run average relative income.
But it can be a problem, as the surging real-estate values can make homeownership unaffordable for many and also increase the risk of a financial crisis- like the one that had hit the US in 2008 after a housing bubble burst.
China can also potentially run into similar trouble over the debt of property developers such as the China Evergrande group.
What can be the solution?
As per the report, the ideal resolution will be for the world’s wealth to find its way into a more productive investment that will expand the global Gross Domestic Product (GDP). The nightmare scenario will be a collapse in asset prices that can erase as much as one-third of global wealth, bringing it more in line with the world income.
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