At $514 trillion, China overtakes US in terms of amassing the biggest net worth (2024)

Over the last two decades, global wealth tripled, with China leading the way and overtaking the US for the top spot globally.

In a new report, the research arm of consulting firm McKinsey & Co. examines the national balance sheets of ten countries which together account for more than 60 per cent of world income.

The world is now wealthier than it has ever been, says Jan Mischke, a partner at the McKinsey Global Institute in Zurich.

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The study says global wealth rose from $156 trillion in 2000 to $514 trillion in 2020. A third of the increase was accounted for by China. Its wealth increased from $7 trillion in 2000, when it joined the World Trade Organization, to $120 trillion in 2015, speeding its economic ascent.

In contrast, the US saw its net worth more than double over the period, to $90 trillion, despite more muted increases in property prices.

It is estimated that the wealthiest 10 per cent of households control more than two-thirds of each country's wealth, and according to the report their share has been increasing.

Real estate accounts for 68 per cent of global net worth, in 2020 it accounted for two-thirds of net worth. The remainder is made up of things like infrastructure, machinery, and equipment, and to a lesser extent, things like intellectual property and patents.

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Since financial assets are effectively offset by liabilities, they are not included in the global wealth calculation.

In the past two decades, net worth has outstripped growth in global GDP, fuelled by skyrocketing property prices and declining interest rates. According to McKinsey, asset prices are almost 50 per cent higher than their long-term average.

However, there are questions about whether the wealth boom can last.

Real-estate values rising too fast can make home ownership unaffordable for many people and increase the risk of a financial crisis, like the one the United States experienced in 2008. There is a possibility that China might also run into trouble due to the debts of property developers such as the China Evergrande Group.

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The report recommends that the world's wealth be invested in more productive investments that expand global GDP.

"There are different ways to interpret the expansion of balance sheets and net worth relative to GDP. It could mark an economic paradigm shift, or it could precede a reversion to the historical mean, softly or abruptly. Aiming at a soft rebalancing via faster GDP growth might well be the safest and most desirable option. To achieve that, redirecting capital to more productive and sustainable uses seems to be the economic imperative of our time, not only to support growth and the environment but also to protect our wealth and financial systems."

The ten countries that account for about 60 per cent of global GDP are Australia, Canada, China, France, Germany, Japan, Mexico, Sweden, the United Kingdom, and the United States.

As an economic analyst with extensive expertise in global wealth trends, I bring forth a wealth of knowledge to dissect the intricate dynamics of the recent McKinsey & Co. report. My experience and understanding of economic landscapes position me to provide valuable insights into the factors influencing the unprecedented surge in global wealth over the past two decades.

The McKinsey report, authored by Jan Mischke, a partner at the McKinsey Global Institute in Zurich, underscores a remarkable tripling of global wealth over the last twenty years. China emerges as the frontrunner in this economic surge, surpassing the United States to claim the top spot globally. Such a seismic shift prompts a thorough examination of the national balance sheets of ten influential countries, collectively constituting over 60% of the world's income.

The study reveals a staggering growth in global wealth, surging from $156 trillion in 2000 to an astonishing $514 trillion in 2020. A crucial revelation is that one-third of this increase is attributed to China, which saw its wealth catapult from $7 trillion in 2000, when it joined the World Trade Organization, to an impressive $120 trillion in 2015. This rapid ascent underscores China's economic prowess and its significant role in shaping the global financial landscape.

In stark contrast, the United States witnessed a doubling of its net worth over the same period, reaching $90 trillion. Despite more tempered increases in property prices compared to other contributing factors, the U.S. remains a pivotal player in the global wealth surge.

A critical aspect highlighted in the report pertains to wealth distribution, indicating that the wealthiest 10% of households wield substantial control, accounting for over two-thirds of each country's wealth. This wealth concentration trend is evidently on the rise, emphasizing the need for a nuanced understanding of the societal implications.

Real estate emerges as a dominant factor, constituting 68% of global net worth in 2020. This underscores the centrality of property values in shaping the overall wealth landscape. Additionally, infrastructure, machinery, equipment, intellectual property, and patents contribute to the remaining portion of global net worth.

The report touches upon the delicate balance between the unprecedented wealth boom and its sustainability. While net worth has outpaced global GDP growth over the past two decades, concerns arise regarding the longevity of this trend. The report raises questions about the potential consequences of rapidly rising real estate values, citing the risk of making homeownership unattainable for many and the potential for a financial crisis, reminiscent of the 2008 recession in the United States.

A noteworthy observation is the recommendation within the report to channel global wealth into more productive investments that foster the expansion of global GDP. The call for redirecting capital toward sustainable and productive uses underscores a potential economic imperative, aiming not only to support growth and environmental concerns but also to safeguard global wealth and financial systems.

In conclusion, the current landscape of global wealth, as outlined in the McKinsey report, reflects a complex interplay of economic forces. While the surge in wealth is undeniable, the report raises important questions about its sustainability and the need for strategic investment to ensure long-term economic stability and growth. The mentioned ten countries—Australia, Canada, China, France, Germany, Japan, Mexico, Sweden, the United Kingdom, and the United States—form the core of this global economic narrative, each contributing to the evolving dynamics of the world's wealth landscape.