The digital boom and outsourcing businesses appear to have helped the Chinese gain the most wealth in the world in the last two decades, pipping the US by the huge margin of $30 trillion, according to a report by researchers at the consultancy McKinsey & Co..
The study that focussed on the world’s 10 nations representing more than 60% of global income found that the total wealth in the world had risen to $514 trillion in 2020 from $156 trillion in 2000.
China made the most during this period, going from $7 trillion in 2000 to $120 trillion in 2020 whereas the US saw its wealth more than double to just $90 trillion during this period.
In both countries, 66% wealth was held by the richest 10% of the population, and it is their share that has been increasing steadily, the report said.
As much as 68% of the total wealth is stored in real estate, while much of the rest is held in infrastructure, machinery and equipment and intellectual property and patents. The researchers did not count financial assets as they are effectively offset by liabilities.
The steep rise in net worth over the past two decades has outstripped the increase in global gross domestic product and has been fueled by ballooning property prices pumped up by declining interest rates, according to McKinsey.
The report found that his increase in wealth was fuelled by a more-than-justifiable surge in asset prices, which it said was “almost 50% above their long-run average relative to income”.
This, it said, raises questions about the sustainability of the wealth boom.
“Net worth via price increases above and beyond inflation is questionable in so many ways,” Jan Mischke, a partner at the McKinsey Global Institute in Zurich, said in an interview with Bloomberg. “It comes with all kinds of side effects.”
When real estate prices keep rising, they can become unaffordable to much of the population and trigger a financial crisis like in the US in 2008 and the recent Evergrande crisis in China.
A Credit Suisse report last month had pointed out that while the top 1% of the world, having more than $1 million each, held 43% of global wealth, about 2.8 billion adults have less than $10,000, collectively owning just 1.4% of global wealth.
The Covid-19 pandemic had come as a huge blow to the economic activity of a large section of people, especially female workers, millennials and minorities.