China topped the list of richest countries overtaking America, two-thirds of the richest 10% of the families have the most wealth
Global wealth has tripled in the past two decades, with China leading the way and beating a country like the US to take the top spot worldwide. According to a Bloomberg report, a new report by the research arm of Consultant McKenzie & Co., which examines the national balance sheets of ten countries representing more than 60% of world income
According to the study, the total wealth worldwide increased from $156 trillion in 2000 to $514 trillion in 2020. In which China has got about a third of the growth. Its wealth grew from just $7 trillion in 2000 to $120 trillion in the year before it joined the WTO, spurring its economic growth.
10 percent richest
Due to a more muted rise in property prices, the US has seen its total wealth more than double, reaching $90 trillion. The report said that in both countries - the world's largest economies - more than two-thirds of the wealth is held by the richest 10% of households, and their share continues to grow.
According to McKenzie calculations, 68% of the global net worth is stored in real estate. The balance lies in things like infrastructure, machinery, and equipment and, to a lesser extent, in so-called intangibles such as intellectual property and patents.
Financial assets are not counted in the global asset calculation as they are effectively offset by liabilities. For example, a corporate bond held by an individual investor represents an IOU by that company.
What will be the 'side effect?'
According to McKenzie, the sharp increase in net worth over the past two decades has outpaced the growth in global GDP, and the decline in asset prices has led to increased asset prices. It was found that property prices are about 50% higher than their long-term average relative to income. This raises questions about the stability of the wealth boom.
Mischke pointed out that net worth is questionable in many ways through price increases over and above inflation. It comes with all kinds of side effects.
Rising real estate values can make homeownership unaffordable for many people and increase the risk of financial crises – such as after the US housing bubble burst in 2008. China could potentially get into similar trouble with debt to property developers such as the China Evergrande Group.
According to the report, the ideal resolution would be for the world's wealth to find its way into more productive investments that lead to an expansion of global GDP. The scenario would be a fall in property prices that could wipe out a third of global wealth, bringing it in line with world income.