China’s GDP has surpassed that of U.S., becoming the country with highest net worth. But let’s not judge a book by its cover.
- McKinsey report announces China as the richest nation in world with $120 trillion in GDP.
- Beijing now alone accounts for one-third of the global wealth.
- China’s GDP increased by $113 trillion, U.S.’s $90 trillion in the last two decades.
- However, China’s economic model suffers major challenges, raising skepticism about the growth.
Earlier in March this year, CNBC published a report with the headline “US will remain richer than China for the next 50 years or more.” Eight months down the line, China has surpassed the world superpower as the richest nation in the world with a net worth of $120 trillion.
Among the top 10 nations of the world that alone account for 60 per cent of the world income, China has emerged as the wealthiest nation on the planet. In the period between 2000 to 2021, China’s net worth increased by whopping $113 trillion, from $7 trillion to $120 trillion.
Meanwhile, among U.S. recorded an increase in net worth of $90 trillion in the period of 20 years. In the report released by the McKinsey & Co., it is found that Beijing now alone account for one-third of world’s wealth. And the biggest factor to be credited for colossal growth is the property price hike in the country.
But, is Chinese Economy really healthy?
While the world media is busy covering China’s massive GDP that has surpassed that of U.S., the question is, how accurately does the figure reflect on China’s actual economic health?
Consider this, the nation with world’s largest population and now world’s biggest GDP only boast of $10,500 in per capita GDP. Per capita GDP of the U.S. stands at $63,544 in 2020. The explanation of the comparison among the figures here is needless.
Per capita GDP is not the only indicator of the other side of Chinese economy that narrates sad state of affairs. Behind the veil of glistening trade centers of Beijing and Shanghai, two-third of China that resides in rural areas is living under extreme poverty.
The report by McKinsey & Co. further states that 68 percent of the global wealth lies in the real estate sector. Strangely, China’s real estate crisis needs no introduction- it has already dominated headlines since weeks. President Xi Jinping’s housing policies were central to the jaw dropping growth of the country’s economy in the past two decades. However, with the recent revelation of the Evergrande fiasco that has brought the market on verge of another housing crisis like 2008, the world has witnessed that China’s economic model is more likely to be broken than soaring.
The country relies badly on real estate and the problem is, it doesn’t have any other alternative in sight that can match up to similar returns. Recent series of housing crisis has also revealed that the nation can no longer rely on real estate to keep its economy soaring. China is home to world’s largest number of unoccupied apartments. The local builders who initiated the construction are so short of cash that the completion of construction is nowhere in sight. Citizens of China are forced to live in half-build housing apartments.
Two strong option of resort for the Chinese economy are the green technology and electric vehicles. However, it will still substaintial amount of time to match up to the scale of real estate in the country.
Consumer spending, which is another indicator of the health of economy, is also on a constant decline since years. According to World Bank, China has recorded a constant drop in household and government spending as a share of GDP- from 85% in 1962 to 56% in 2019 and 54.3% in 2020.