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.
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.
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.
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.
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