Wealthy Nations Daily Update - Global Middle-Class

Growth of wealth in China has been “fivefold… since the beginning of the century” meaning that China now has the largest middle-class in the world* according to the Global Wealth Report released this week by Credit Suisse. This is a comprehensive report widely used to evaluate trends in wealth creation and its implications on consumption and investment. It is of particular interest this year with its focus on middle-class wealth. A strong and growing middle-class is often a bedrock for financial stability within a country and can help spur new consumption and entrepreneurship. The world’s middle class comprises 664 million adults or 14% of the global adult population; 109 million are in China compared to only 92 million in the US.

Wealth trends within individual countries has been largely positive over the past 12 months ending June, the US leading with an increase of USD 4.6tn and China by 1.5tn with the only other country exceeding USD 100bn being the UK with a USD 360bn rise in wealth. Global wealth would have increased USD 13tn using constant (average) exchange rates but in fact declined by over USD 12tn due to 95% of the world experiencing depreciation against the dollar; “Europe [being] responsible for USD 10.7tn of the aggregate loss”.

One of the most striking datasets in the report is a wealth decile breakdown of the global population. “Relatively few adults in China are found in the bottom half of the global wealth distribution, but they dominate the upper-middle section, accounting for 43% of worldwide membership of deciles 6–8. The sizeable presence of China in the upper-middle section reflects not only its population size and growing average wealth, but also wealth inequality which, despite a rapid increase in recent years, is not among the highest in the developing world… It now has more people in the top 10% of global wealth holders than any other country except for the United States and Japan”. This seems to be underappreciated by many attempting to quantify the potential of consumer growth in China. Given the rate of growth over recent decades sustaining this level of wealth equality is no easy feat.

Another compelling statistic within the paper are the median wealth figures, which favour wealthy countries with lower levels of wealth inequality, and scale from New Zealand at the top with USD 182.6k (UK 126.5k, US 49.8k, Germany 43.9k, Mexico 8k, China 7.4k, Brazil 3.3k) to India with a median wealth of USD 868 not dissimilar to the African median of USD 639. It’s clear just how much scope there is for continual change and development. The example of Greece being poignant, whose median was as high as USD 136.8k in 2007 and which now stands at USD 81.3k. Of course for countries with the resources and resolve the inverse is possible perhaps even probable.

* The middle-class wealth brackets are different for each country and is for example USD 50-500k in the US but is bound at USD 28k for Brazil and China.

Other smatterings in the reports include:
· To be part of the wealthiest half of the world's adult population you need USD 3,210, for the top 10% you need USD 69k and to be among the richest percentile, USD 760k.
· 1% of the world’s population now own 50% of household wealth.
· There are 120,000 UHNWIs, each worth more than USD 50 million, with 8% of these now from China.

This first point, according to our back of the envelope calculations, means that half of the world’s population have less total wealth than Bill Gates could earn in half a minute (6% interest on his USD 72 billion would earn around USD 3,210 every 30 seconds).

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