Global Net Worth Grows Over 3 Times in 20 Years... Real Estate Accounts for 68%

China's Net Assets Surpass the US
Global GDP Growth Rate Exceeds
Economic Crisis Feared if Real Estate Bubble Bursts

[Image source=Yonhap News]

[Asia Economy Reporter Kim Bo-kyung] Over the past 20 years, global net assets have more than tripled, and China has already surpassed the United States in terms of net assets, Bloomberg reported on the 14th (local time).

According to a report analyzing the balance sheets of 10 countries that account for more than 60% of global income by McKinsey & Company, global net assets increased by about $358 trillion, or approximately 229%, from $156 trillion (about 18,375.5 quadrillion KRW) in 2000 to $514 trillion (about 60,543 quadrillion KRW) in 2020.

The country with the largest net assets was China. China's net assets grew more than 17 times from $7 trillion (about 8,246 quadrillion KRW) in 2000, the year before China joined the World Trade Organization (WTO), to $120 trillion (about 14,135.5 quadrillion KRW) last year. During this period, China accounted for about one-third of the global net asset increase.

The United States ranked second with $90 trillion (about 10,601.6 quadrillion KRW). Due to the 2008 global financial crisis and the bursting of the real estate bubble, the U.S. net assets grew by only $50 trillion, or 125%, during the same period.

According to McKinsey's calculations, 35% of global net assets were invested in land, and 33% in houses and other buildings. This means that more than two-thirds, or 68%, of total net assets were in real estate.

The remaining 32% were in the form of infrastructure, machinery, intellectual property rights, patents, and so on. Financial assets were excluded from this net asset calculation because they are offset by someone’s liabilities, the report stated.

The report also noted that the pace of net asset growth over the past 20 years has outpaced the growth rate of global gross domestic product (GDP). This was thanks to soaring real estate prices influenced by declining interest rates. During this period, asset price increases were nearly 50% higher than the long-term average income growth.

Regarding this, Jan Mischke, a partner at McKinsey Global Institute, said, "Asset price increases that outpace inflation can cause many side effects."

The rapid rise in real estate prices prevents many people from owning homes. Also, if the real estate bubble bursts, it can trigger economic crises like the 2008 global financial crisis. In particular, China could face a financial crisis due to debt problems of real estate developers such as the Evergrande Group.

The report proposed that the most ideal solution to these problems is to find more productive areas that can expand global GDP, invest global assets there instead of in real estate, and grow global GDP to the level of net assets.

This content was produced with the assistance of AI translation services.