Riyadh: China is the world's wealthiest country, overtaking the US, while wealth around the world tripled in the last twenty years, mainly due to the real estate sector, according to analysis by consulting giant McKinsey.
Global net wealth jumped to $514 trillion in 2020, rising by $358 trillion from 2000 levels, according to a McKInsey report cited by Bloomberg.
“We are now wealthier than we have ever been,” Jan Mischke, a partner at the McKinsey Global Institute in Zurich, told Bloomberg in an interview.
China was responsible for almost one-third of the increase in worldwide wealth.
Before joining the World Trade Organization, its wealth was $7 trillion in 2000. By 2021, it had surged to $120 trillion.
Meanwhile, the US observed an increase in wealth of over 100 percent over the period to reach $90 trillion.
More than two-thirds of the wealth in both China and the US is held by the richest 10 percent of households, the report added.
Real estate accounted for 68 percent of the world's wealth, McKinsey said.
They noted that financial assets were not involved in global wealth, or net worth, calculations as these assets were canceled by financial liabilities.
A financial asset for one party is a financial liability for another.
The massive increase in net wealth during the period exceeded gains in global GDP as they were driven by inflating property prices following declining interest rates.
Asset prices were almost 50 percent more than their long-term average relative to income. This has caused speculation on whether the rise in wealth is sustainable.
Growth in real-estate prices can make housing unaffordable, risking a financial crisis similar to the one that took place in 2008.
Also, China may have similar concerns over the debt of property developers like the China Evergrande Group.
To avoid such risks, more productive investments that expand global GDP should be pursued using global wealth, the report said.