Global wealth rises as China overtakes the United States to take the top spot

Global wealth has tripled over the past two decades, with China leading the way and overtaking the United States for the world’s top spot.

That’s one lesson from a new report from the research arm of consultants McKinsey & Co. that examines the national balance sheets of ten countries accounting for more than 60 percent of global income.

“We are now richer than ever,” Jan Mischke, partner of the McKinsey Global Institute in Zurich, said in an interview.

Global net worth rose to $ 514 trillion in 2020, from $ 156 trillion in 2000, according to the study. China accounted for nearly a third of the increase. Its wealth skyrocketed to $ 120 trillion from just $ 7 trillion in 2000, the year before it joined the World Trade Organization, accelerating its economic ascent.

The richest 10%

The United States, held back by more moderate increases in house prices, saw its net worth more than double over the period, to $ 90 trillion.

In both countries – the world’s largest economies – more than two-thirds of wealth is held by the richest 10 percent of households, and their share has increased, according to the report.

According to McKinsey calculations, 68% of global net worth is stored in real estate. The remainder is held by items such as infrastructure, machinery and equipment and, to a much lesser extent, so-called intangibles such as intellectual property and patents.

Financial assets are not taken into account in global wealth calculations because they are effectively offset by liabilities: a corporate bond held by an individual investor, for example, represents an IOU by that company.

‘Side effects’

The sharp rise in net worth over the past two decades has outpaced the increase in global gross domestic product and has been fueled by soaring house prices inflated by falling interest rates, according to McKinsey. He found that asset prices are nearly 50 percent above their long-term average relative to income.

This raises questions about the sustainability of the wealth boom.

Soaring real estate values ​​can make home ownership unaffordable for many and increase the risk of a financial crisis, like the one that hit the United States in 2008 after a real estate bubble burst. China could potentially face similar debt issues from real estate developers like China Evergrande Group.

The ideal resolution would be for global wealth to end up in more productive investments that increase global GDP, according to the report. The nightmarish scenario would be an asset price collapse that could wipe out up to a third of global wealth, aligning it more with global income.

Tech companies vying for HK listing face cyber check

China’s cyberspace regulator on Sunday proposed to force companies seeking to list stocks in Hong Kong to request cybersecurity inspections if they are dealing with data relating to national security.

Large internet platforms planning to set up headquarters, operating or research centers overseas should also submit a report to regulators, the China Cyberspace Administration said. The document calls for requiring public comment on Internet platforms formulating privacy policies or enacting modification rules that could significantly affect the rights and interests of users. (Reuters)

Power supply, spending recovery in China

The Chinese economy fared better than expected in October as retail sales climbed and energy shortages eased, partially offsetting a collapse in real estate.

Industrial production rose 3.5% in October from a year earlier, while growth in retail sales accelerated to 4.9%, beating economists’ forecasts. Growth in capital investment slowed to 6.1 percent in the first 10 months of the year, from a forecast of 6.2 percent.

The surveyed unemployment rate was stable at 4.9 percent. Better than expected numbers will be a relief after weakening momentum in the second half of the year. (Bloomberg)

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