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China Becomes Richest Country overtakes US 

China Becomes Richest Country overtakes US 

Ground Report | New Delhi: Richest Country in the world; World wealth has tripled in the last two decades with China leading the way after surpassing the United States and ranking first in the world. That’s one of the findings of a new report from the research arm of consulting firm McKinsey & Co., which examines the national balance sheets of 10 countries that together account for more than 60% of world revenues.

Richest Country in the world

“We are now richer than ever,” Jan Mischke, a partner at the McKinsey Global Institute in Zurich, said. Net wealth worldwide rose to $ 514 trillion in 2020, up from $ 156 trillion in 2000, according to the study. China accounted for almost a third of the increase. His wealth soared to $ 120 trillion from just $ 7 trillion in 2000, the year before he joined the World Trade Organization, accelerating his economic rise.

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China’s wealth has increased from just $7 trillion in 2000 to $120 trillion in 2020. By comparison, the US could only double its wealth during the same period. However, this increase in net worth was not in line with the global gross domestic product (GDP), the McKinsey report highlighted. The report cautioned that the “side effects” of such a wealth boom could end in crisis.

The richest 10%

US net worth, held back by more moderate increases in property prices, more than doubled during this period to $ 90 trillion. In both countries, which have the world’s largest economies, more than two-thirds of wealth is held by the richest 10% of households, and their share has been increasing, the report notes.

As calculated by McKinsey, 68% of global net worth is held in real estate. The rest is in infrastructure, machinery, equipment and, to a much lesser extent, so-called intangibles such as intellectual property and patents.

In a Bloomberg report, Mischke said, “net worth is questionable in many ways through price increases above and beyond inflation.” “It comes with all kinds of side effects.” In fact, rising real estate prices may be pushing most people out of the real estate market, which is what we saw in the U.S. in 2008. The subsequent housing-bubble like crisis brings us closer to a significant financial crisis. And it could happen to China as well, especially in the case of debt to property developers like China Evergrande Group.

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The best solution to these world-historic constraints would be to access more productive investments capable of meaningfully expanding the world’s wealth to global GDP, the report said. But if a worst-case scenario is achieved, asset prices could collapse, causing up to one-third of global wealth to disappear as the bottom line matches world income.

These are particularly interesting times as the world’s richest people are getting richer than ever before, with the poorest suffering more in leading countries than has been seen for at least half a century. (Richest Country in the world)

Side effects

The sharp rise in net wealth over the past two decades has outpaced global gross domestic product growth and has been intensified by rising property prices, which was driven by lower interest rates, according to McKinsey. The firm revealed that asset prices are nearly 50% above their long-term average relative to revenue. That raises questions about the sustainability of the wealth boom.

“Net wealth through price hikes above and beyond inflation is questionable in many ways,” Mischke said. “It carries all kinds of side effects.”

Rising real estate values ​​can make homeownership unaffordable for many people and increase the risk of a financial crisis, like the one that hit the US in 2008 after the housing bubble burst. China could have similar problems from the debt of real estate developers like China Evergrande Group.

The ideal solution would be for the world’s wealth to flow into more productive investments that would expand global GDP, according to the report. The worst-case scenario would be a collapse in asset prices that could erase up to a third of global wealth, bringing it closer to world income.

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