The richest nation is no longer the United States, it is now China

The Chinese have supplanted the United States as the world’s richest nation at a time when global wealth has grown three times over the past two decades, according to a report. According to McKinsey & Co’s research arm, China contributed about one-third of global net worth gains in the last 20 years.

Bloomberg reported that global net worth grew from $156 trillion in 2000 to $514 trillion in 2020. China’s wealth shot up to $120 trillion from $7 trillion in 2000 during that period. Despite a muted increase in property values, the US saw its net worth double to $90 trillion in the past two decades.

In China and the US, over two-thirds of the wealth belongs to the top 10 percent of households, according to the report. Ownership of wealth by these individuals is on the rise. Global net worth is concentrated in the real estate sector, with 68 percent of it holding intangible assets such as intellectual property and patents, as well as machinery and equipment. Financial assets are not included in the calculation of global wealth since they are offset by liabilities.

According to the McKinsey & Co report, global net worth in the period under review outpaced global GDP growth. The steep rise in net worth was due to skyrocketing property prices as a result of declining interest rates. Similarly, asset prices are about 50 percent above their long-run average relative to income. If this trend continues, the wealth boom will not last.

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Jan Mischke, a partner at the McKinsey Global Institute in Zurich, told Bloomberg that adding value through price increases above inflation is questionable in many ways. The Chinese property developer debt crisis is comparable to the 2008 financial crisis in the US that followed the burst of the housing bubble. The report suggests that the best way to avoid crisis is to invest the world’s wealth in more productive investments that increase global GDP. McKinsey & Co considered the national balance sheets of 10 countries, which represented over 60 percent of the world’s income.