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China is now world's richest nation, ahead of US

  • Sun Online Desk
  • 16th November, 2021 10:04:51 PM
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BEIJING: China is now world’s richest nation, a report in Bloomberg said as the global wealth tripled over the last two decades and China leading the way and overtaking the United States for the top spot.

The research arm of consultants working in McKinsey & Co. analyzed the balance sheets of ten different countries that, combined, comprise 60 percent of the world’s total income.

The world’s net worth rose to an unprecedented $514 trillion in 2020, from an earlier net worth of $156 trillion in 2000, with China taking the largest single share: nearly one-third of the world’s income.“We are now wealthier than we have ever been,” Jan Mischke, a partner at the McKinsey Global Institute in Zurich, said in an interview.

According to a new global financial data from McKinsey & Co., initially reported by Bloomberg, China’s wealth launched to $120 trillion, from its previous $7 trillion in 2000 — an unspeakably colossal growth from its days before joining the World Trade Organization, which accelerated its rise to power.

The US, meanwhile, has experienced muted increases in property prices, but nearly doubled its net worth over the same period, to $90 trillion. China and the US are the largest economies in the world, but the lion’s share of the world’s wealth is held by the richest 10 percent of households. And they’re only getting richer, according to the report.

The McKinsey report also said 68 percent of the global net worth is tied up in real estate, but it also included machinery, infrastructure, equipment, and, although comprising a much smaller portion, intangible goods like patents and intellectual property.

Not included in the global wealth assessment are financial assets, since they are balanced by liabilities. For example, corporate bonds held by a specific investor are still comparable to an I-owe-you from that company. But the sharp rise in net worth in the last two decades has surged beyond the increase in global gross domestic product (GDP), thanks in large part to ballooning property prices, which the report says is the result of declining interest rates.

It also concluded that asset prices had risen to nearly 50 percent higher than their long-run average, compared to income. And that could lead some to question the sustainability of the modern boom in wealth.

“Net worth via price increases above and beyond inflation is questionable in so many ways,” said Mischke, in the Bloomberg report. “It comes with all kinds of side effects.” Indeed, rising real estate prices can push most people out of the real estate market, bringing us closer to a substantial financial crisis like the one that struck the US in 2008, post-housing-bubble crisis. And this could also happen to China, especially in the case of the debt of property developers like China Evergrande Group.

The report adds that the best solution for these world-historical bumps would be for the world’s wealth to reach more productive investments capable of meaningfully expanding global GDP. But if the worst-case obtains, asset prices might collapse, causing up to one-third of global wealth to vanish as the bottom line drops back to match world income.

These are interesting times specifically because the richest people in the world are getting far richer than any have before, with the poorest beginning to suffer more in leading countries in ways not seen for at least half a century.