Global wealth reached $514 trillion last year, up from $1,156 trillion at the beginning of this century. That’s according to a report by the McKinsey Global Institute, based on an analysis of the national balance sheets of ten countries that collectively account for more than 60 percent of global income.
Researchers assert that China has now pushed the United States off the top of the global rankings.
“Global prosperity has tripled in the past two decades,” asserts Jan Michki, a researcher at the McKinsey Global Institute. “We are now richer than ever.” However, the researchers also found that China was responsible for nearly a third of the additional wealth created over the past two decades.
China’s wealth reached $120 trillion last year, compared to just $7 trillion at the turn of the century. That was a year before the Asian country joined the World Trade Organization, accelerating China’s economic growth.
The United States, where wealth growth has been hampered by relatively moderate increases in real estate prices, more than doubled to $90 trillion over the same period.
The researchers also note that in both countries – the world’s two largest economies – more than two-thirds of wealth is concentrated in just 10 percent of households.
The researchers note that “the share of the wealth of the richest segments of the population has increased even further over the past 20 years.”
The researchers also found that 68 percent of global wealth is stored in real estate. The balance mainly consists of assets such as infrastructure, plant and equipment. To a much lesser degree, so-called intangible assets, such as intellectual property and patents, also have a share in global wealth.
The McKinsey Report does not consider a financial asset. “After all, these assets are offset by liabilities,” the researchers noted. “After all, the corporate bond that an individual investor has in their portfolio constitutes a debt owed by the corporation.”
The researchers note that “the increase in wealth over the past two decades has outpaced growth in global GDP.” “This phenomenon was driven by the rise in real estate prices, which rose sharply due to lower interest rates.”
There is a growing imbalance between assets and income. This raises questions about the sustainability of the increase in prosperity. A number of side effects must be taken into account.”
real estate crisis
The researchers note that “rising real estate values can make home ownership unsustainable for many.” “These problems can increase the risk of a financial crisis, as the United States suffered 13 years ago after the real estate bubble burst.”
“China is likely to face similar problems due to recent problems with property developers such as Evergrande.”
“The ideal solution is for global wealth to find its way into more productive investments that increase global GDP,” McKinsey emphasizes.
“A collapse in asset prices could turn into a nightmare, wiping out up to a third of global wealth.”
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