Global wealth surges as China overtakes US to grab top spot

Global wealth tripled over the last two decades, with China leading the way and overtaking the US for the top spot worldwide.

That’s one of the takeaways from a new report by the research arm of consultants McKinsey & Co. that examines the national balance sheets of ten countries representing more than 60 per cent of world income.

“We are now wealthier than we have ever been,” Jan Mischke, a partner at the McKinsey Global Institute in Zurich, said in an interview.

Net worth worldwide rose to $514 trillion in 2020, from $156 trillion in 2000, according to the study. China accounted for almost one-third of the increase. Its wealth skyrocketed to $120 trillion from a mere $7 trillion in 2000, the year before it joined the World Trade Organization, speeding its economic ascent. 

Richest 10 per cent

The US, held back by more muted increases in property prices, saw its net worth more than double over the period, to $90 trillion.

In both countries — the world’s biggest economies — more than two-thirds of the wealth is held by the richest 10 per cent of households, and their share has been increasing, the report said.

As computed by McKinsey, 68 per cent of global net worth is stored in real estate. The balance is held in such things as infrastructure, machinery and equipment and, to a much lesser extent, so-called intangibles like intellectual property and patents. 

Financial assets are not counted in the global wealth calculations because they are effectively offset by liabilities: A corporate bond held by an individual investor, for instance, represents an IOU by that company.

‘Side effects’

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. It found that asset prices are almost 50 per cent above their long-run average relative to income. That raises questions about the sustainability of the wealth boom.

Surging real-estate values can make home ownership unaffordable for many people and increase the risk of a financial crisis — like the one that hit the US in 2008 after a housing bubble burst. China could potentially run into similar trouble over the debt of property developers like China Evergrande Group.

The ideal resolution would be for the world’s wealth to find its way into more productive investments that expand global GDP, according to the report. The nightmare scenario would be a collapse in asset prices that could erase as much as one-third of global wealth, bringing it more in line with world income.

Tech companies up for HK listing face cyber check

China's cyberspace regulator on Sunday proposed requiring companies pursuing share listings in Hong Kong to apply for cybersecurity inspections if they handle data that concerns national security.
 

Large internet platforms planning to set up headquarters, operating or research centres abroad should also submit a report to regulators, the Cyberspace Administration of China said. The document calls for requiring public comment on internet platforms formulating privacy policies or making amending rules that could significantly affect user rights and interests. (Reuters)

Power supply, spending pick up in China

China’s economy performed better than expected in October as retail sales climbed and energy shortages eased, partly offsetting a slump in property. 
 

Industrial output rose 3.5 per cent in October from a year earlier, while retail sales growth accelerated to 4.9 per cent, beating economists’ forecasts. Growth in fixed-asset investment eased to 6.1 per cent in the first 10 months of the year, compared with a forecast of 6.2 per cent.

The surveyed jobless rate was steady at 4.9 per cent. The better-than-expected numbers will come as a relief after the momentum weakened in the second half of the year.  (Bloomberg)