Global prosperity has already tripled during this century; The United States now overtaken by China

Global wealth reached $ 514 trillion last year, up from $ 1.16 trillion at the start 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 together account for over 60% of global income.

The researchers point out that China has now propelled the United States to the top of the world rankings.

China

“Global prosperity has tripled in the last two decades known, ”says Jan Mischke, 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 had $ 120 trillion in wealth last year, up from just $ 7 trillion at the turn of the century. This was the year before the Asian country became a member of the World Trade Organization (WHO), which accelerated China’s economic growth.

The United States, where wealth growth hampered by relatively moderate increases in house prices, they more than doubled to $ 90 trillion in 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% of households.

“The share of wealth of the richest categories of the population has increased further over the past twenty years”, underline the researchers.

imbalance

The researchers further found that 68% of the world’s wealth stored in real estate. The balance consists mainly of assets such as infrastructure, machinery and equipment. To a much lesser extent, so-called intangible assets, such as intellectual property and patents, also have a share in global wealth.

The McKinsey report does not consider financial assets. “After all, these assets are offset by bonds,” the researchers note. “After all, a corporate bond that an individual investor has in their portfolio simultaneously constitutes debt that a company has outstanding.”

“The increase in wealth over the past two decades has outpaced growth in global gross domestic product,” the researchers note. “This phenomenon has been fueled by rising house prices, which have risen sharply due to falling interest rates.”

“There is a growing imbalance between assets and income. This raises questions about the sustainability of increased prosperity. There are a number of side effects that need to be taken into account.

real estate crisis

“Rising real estate values ​​can make owning a home unaffordable for many,” the researchers note. “These problems can increase the risk of a financial crisis, as in the United States” thirteen years ago had to experience after the real estate bubble burst.

“China could potentially face similar problems due to recent issues with real estate developers like Evergrande.”

“The ideal solution would be for global wealth to end up in more productive investments that increase global gross domestic product,” says McKinsey.

“A collapse in asset prices could turn into a nightmare, wiping out up to a third of the world’s wealth.”