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McKinsey reveals global balance sheet report

McKinsey reveals global balance sheet report

Recently, McKinsey has published a report on the world's net wealth. According to MGI’s The Rise and Rise of the Global Balance Sheet, the world's wealth has soared considerably over the two decades but nowhere as much as in China. Its net worth was the highest among the 10 countries. This is hardly surprising as China has been accumulating wealth faster than anyone in the world since the beginning of the 21st century.

McKinsey experts conducted a thorough analysis of all financial assets owned by the population and businesses in the ten largest countries. "It can be seen that real assets and net worth, the financial assets of households, companies and governments, and the financial assets and liabilities of financial institutions have each tripled since 2000 to about $500 trillion each, or approximately six times global GDP." The total global wealth rose to 514 trillion from 156 trillion recorded in 2000. China has become the undisputed leader. The country accounts for one-third of that growth. On a per capita basis, Chinese net worth soared to 120 trillion from 7 trillion. In the United States, this figure more than doubled to $90 trillion. In both economies, more than two-thirds of assets belong to 10% of the population, and the gap is getting bigger.

Importantly, real estate plays a major role in global wealth. "Across the 10 countries that were studied, real estate valuations have more than tripled on average," the report states. Hence, 68% of the total value of all assets around the world accounts for real estate. Analysts at McKinsey believe that the total value of global assets ballooned over the past two decades following a jump in real estate prices due to lower interest rates. According to the study, real estate is getting expensive faster than income growth. It means that the number of people who can afford a house is decreasing. In addition, the rapid rise in real estate prices increases the risk of a financial crisis similar to the one that broke out in the US in 2008 triggered by the housing bubble.

 


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