Jakarta, CNN Indonesia —
Consulting firm McKinsey & Co China as richest country world, beat the United States (US). China is recorded to hold one third of the world’s wealth or the equivalent of US $ 120 trillion.
In fact, a year before China was included in the World Trade Organization in 2000, the country’s wealth was only US$7 trillion.
While the US managed to double its wealth for the same period to US $ 90 trillion. In both countries, more than two-thirds of the wealth is held by the 10 percent of wealthy households and their wealth continues to grow.
Meanwhile, globally, the world’s wealth reached US $ 514 trillion in 2020, a rapid increase from the 2000 record which was only worth US $ 156 trillion at that time.
The world wealth report comes from the national financial accounts of 10 countries that represent 60 percent of the world’s wealth.
“We’ve never been richer than this,” said Jan Mischke of the McKinsey Global Institute as quoted by The Straits Times, Monday (15/11).
McKinsey noted that 68 percent of global net worth is held in real estate. The world’s wealth balances take into account physical assets such as infrastructure, machinery and equipment. In addition, intangible assets such as intellectual property and patents are also recorded.
While financial assets are not counted in the global wealth calculation because they are effectively offset by liabilities.
According to McKinsey, the sharp rise in net worth over the past two decades outpaced the increase in global gross domestic product (GDP). They are getting richer thanks to rising property prices supported by lower interest rates.
Reports say that their asset prices are nearly 50 percent above average long-term earnings. That raises questions about the sustainability of the wealth explosion.
“Net wealth through price increases above and beyond inflation is questionable in many ways. Wealth comes with all sorts of side effects,” said Mischke.
Soaring real estate values make home ownership unaffordable for many and increase the risk of financial crises like the one that hit the US in 2008 after the housing bubble burst.
It is feared that China will experience similar problems related to property developer debt that is currently afflicting China Evergrande Group and friends.
The ideal resolution or ‘healthy’ wealth stems from more productive investments that expand global GDP, according to the report. For the record, the recorded wealth could collapse if property prices fell and wipe out a third of global wealth.
(wel/one)
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