China leads as global wealth triples in last two decades

The global net worth has tripled in the last decades with China leading the way, according to a new report by McKinsey Global Institute.

The net worth grew from $160 trillion in 2000 to $510 trillion in 2020 in this period, the research wing of consultants McKinsey & Co said in the report on Monday. 

China accounted for 50 percent of the growth in net worth, or wealth, in this period, followed by the United States, at 22 percent. Japan, which held 31 percent of the ten economies’ wealth in 2000, held just 11 percent in 2020. They are among 10 countries that account for about 60 percent of global GDP.

Assets grew from $440 trillion, or about 13.2 times GDP, in 2000 to $1,540 trillion in 2020.

The average per capita net worth was $66,000, but large variations exist across economies, and even more so across households within an economy.

In the countries in McKinsey’s sample, per capita net worth ranged from $46,000 in Mexico to $351,000 in Australia.

Net worth ranged from 4.3 times GDP in the United States to 8.2 times GDP in China

The report, ‘The rise of the global balance sheet: How productively are we using our wealth?’, provides an in-depth look at the global economy after two decades of financial turbulence and more than 10 years of heavy central bank intervention, punctuated by the pandemic.

It said households are the final owners of wealth. For households, real assets, mostly housing, make up almost half of the net worth. Net financial assets, in roughly equal parts pension assets, deposits, and equity, make up the other half.

The distribution of assets among households varies across countries. For instance, households in Australia, France, Germany, and Mexico hold buildings and land, while in the United States, equity and pensions make up most of the household wealth. In Japan, deposits account for more than one-third of total household assets.

Via those financial assets and real estate holdings, households in the 10 countries control 95 percent of net worth, ranging from 64 percent of national net worth in Mexico to 135 percent in the United States.

While economic growth has been tepid over the past two decades in advanced economies, balance sheets and net worth that have long tracked it have tripled in size, the report said.

This divergence emerged as asset prices rose—but not as a result of 21st-century trends like the growing digitisation of the economy.

Rather, in an economy increasingly propelled by intangible assets like software and other intellectual property, a glut of savings has struggled to find investments offering sufficient economic returns and lasting value to investors.

These savings have found their way instead into real estate, which in 2020 accounted for two-thirds of net worth. Other fixed assets that can drive economic growth made up only about 20 percent of the total.

Moreover, asset values are now nearly 50 percent higher than the long-run average relative to income. And for every $1 in net new investment over the past 20 years, overall liabilities have grown by almost $4, of which about $2 is debt.