A new research report by the consultants McKinsey & Co. showed that China overtook the United States in terms of wealth, Bloomberg reports. The research report analyses the national balance sheets of 10 countries that represent more than 60 percent of the world income. According to the report, China now holds the top spot in global wealth.
The report stated that global wealth tripled in the past two decades. "We are now wealthier than we have ever been," a partner at the McKinsey Global Institute in Zurich, Jan Mischke, said in an interview. The study further noted that the net worth worldwide rose to $514 trillion in 2020, from $156 trillion in 2000.
China solely amounted to almost one-third of the growth in global net worth. China's wealth went up to $120 trillion from $7 trillion in 2000. The East Asian country joined the World Trade Organization in 2001.
The US, on the other hand, doubled its net worth over the period to $90 trillion. The study stated that in both countries, the richest 10 percent of people hold more than two-thirds of the countries' total wealth. And their share has been increasing. China and the US are the world's biggest economies. According to McKinsey's report, 68 percent of global net worth is stored in real estate; in things like infrastructure, machinery and equipment, and to some extent, even intellectual property and patents.
Skyrocketing property prices
The study showed that the rise in global net worth overtook the increase in global gross domestic product. The skyrocketing property prices due to declining interest rates played a major role in the steep hike of the global net worth. However, the fact that asset prices are almost 50% above their long-run average relative to income puts a question mark on the sustainability of the increase in global wealth, the study stated.
"Net worth via price increases above and beyond inflation is questionable in so many ways," Mischke noted. "It comes with all kinds of side effects."