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China overtakes US as richest nation in 'national balance sheet' study

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China has seen its global wealth skyrocket over the past two decades and has now overtaken the U.S. as the wealthiest nation worldwide, according to a new economic analysis on the "national balance sheets" of the world's richest nations.

What are the details?

Between 2000 and 2020, China's net worth soared from $7 trillion to $120 trillion, accounting for an eye-popping one-third of the global increase, global management consulting firm McKinsey & Company reported this month.

Meanwhile, the U.S. saw its net worth only double over the same period to total $90 trillion in 2020.

The revelation came as part of a new analysis from McKinsey called, "The rise and rise of the global balance sheet," which sought to take stock of national wealth by measure of a country's net worth rather than its gross domestic product.

"While the state of economies is usually measured by GDP or other metrics of economic flows, this research examines the balance sheets of ten countries representing more than 60 percent of global income: Australia, Canada, China, France, Germany, Japan, Mexico, Sweden, the United Kingdom, and the United States," the consulting firm stated in its report.

"In this research, we borrow a fundamental tool from the corporate world — the balance sheet — to take stock of the underlying health and resilience of the global economy," it added.

In the report, researchers counted only real assets to determine net worth. They did not count financial assets as part of global wealth calculations, claiming they are effectively offset by liabilities.

"A corporate bond held by an individual investor, for instance, represents an I.O.U. by that company," explained Bloomberg News.

What else?

By more traditional wealth measurements, including GDP, the U.S. remains the world's richest nation. The U.S., with a nominal GDP of more than $21 trillion, significantly outpaces second-place China. The dominant Asian nation tallies a GDP of more than $14 trillion.

When GDP is assessed per capita, the U.S. ($65,298) beats China again ($10,262).

But McKinsey's new analysis argues that GDP only tells part of the story, arguing that over the last 20 years there has been a notable "divergence" between net worth and GDP.

"Net worth and GDP historically moved in sync at the global level," but since 2000, "financial assets and liabilities held outside the financial sector grew much faster than GDP," researchers said.

The report spotlights China's economic rise since joining the World Trade Organization in 2001, Bloomberg reported. It also highlights the effect of the U.S. national debt on its real asset net worth in comparison to other global economies.

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