The year 2016 was politically a very turbulent year, but private wealth shrugged it off: after a weaker 2015 (+4.7%), global financial assets grew again by 7.1% last year, more or less matching the post-crisis average, according to Allianz’s latest “Global Wealth Report.”
Worldwide, financial assets climbed to a new record high of almost EUR 170 trillion. Last year's acceleration in growth came mostly from industrialized countries, where growth doubled to 5.2%
However, Asia (excluding Japan) was once again the uncontested leader in 2016, with growth of 15%. In China financial assets increased by 17.9%.
In a long-term comparison, too, Asia (excluding Japan) is the dominant region, particularly when inflation is also taken into account. Gross per capita financial assets in Asia (excluding Japan) grew by almost 11% per year in real terms in the last decade, compared to 2.1% in North America and 1.4% in Western Europe.
Debt is growing faster than the economy
Global household liabilities increased by 5.5% in 2016, the highest rate of growth since 2007. That means that debt also rose faster than nominal economic output for the first time since 2009, and the global debt ratio increased by almost 1 percentage point to 64.6%.
In Asia ex-Japan, debt growth rose sharply by a further four percentage points to just under 17%, pushing the debt ratio to 46.3%. That means that this region accounts for almost 20% of global private liabilities of just under EUR 41 trillion, compared with less than 7% ten years ago.
At the top were Chinese households who ratcheted up their liabilities by a whopping 23% and which now account for 61% of the region’s total liabilities (excluding Japan).
“Though their overall debt ratio of 45.1% is still comparatively low, the pace of the increase gives cause for concern,” said Allianz chief economist Michael Heise.
Despite the steep rise in debt, global net financial assets – gross financial assets minus debt – reached a new record high of EUR 128.5 trillion at the close of 2016. That represents an increase of 7.6% year-on-year.
Although this is slightly below average for the years since the crisis, it is well above the previous year's growth of 4.8%. By contrast, in Asia ex-Japan, growth of net financial assets slowed to 14.5%, and in China to 16.6%, reflecting the rampant growth of liabilities.
Asset diversification continued in 2016
However, the observed lending growth could also be taken as a sign of increasing financial deepening. This is underlined by the fact that Chinese households continued to diversify their asset portfolio away from deposits to more profitable wealth management products and securities, which profited from the gradual recovery of the stock markets. While these asset classes reported double-digit growth rates, bank deposits grew by only 9.9%.
China rises through the ranks
In the global ranking of the richest countries (per capita financial assets, see table), in net terms, three Asian countries – Japan, Taiwan and Singapore – were among the Top 10 in 2016; back in 2000, it was only Japan.
With net wealth per capita amounting to EUR 12,765, China rose through the rankings and climbed to rank 27 in 2016; back in 2000, it was still at position 40.
Global wealth distribution slowly evening out
Development of global wealth distribution since the turn of the millennium has been defined by one phenomenon in particular: rampant growth in the global wealth middle class. The number of people belonging to this category has more than doubled during this period, from around 450 million in 2000 to over 1 billion today.
However, if we look at the nationality of those moving up the scale, we see that over 80% of them are Chinese. The doubling of the global wealth middle class therefore basically reflects the rise of China.
Despite the emergence of a new global wealth middle class, the world as a whole is still a long way from a “fair” distribution of wealth. If the population of the countries analyzed are divided into global population deciles based on net per capita financial assets, it becomes clear that the richest 10% of the world together own 79% of net financial assets. Nevertheless, the concentration of wealth was still as high as 91% in 2000.