China Overtakes U.S. as Global Leader in Built Asset Wealth

China has overtaken the United States as the world’s wealthiest country measured by the value of its built environment, according to the latest Global Built Asset Wealth Index published by Arcadis.

The index calculates the value of all the buildings and infrastructure contributing to economic productivity in 32 countries, which collectively make up 87% of global GDP.

For the first time, built asset wealth in the US no longer leads the world. With wealth of $36.8 trillion, the United States now trails China at $47.6 trillion. The United States’ built asset stock is largely unchanged in the past two years, while since 2000, China has invested $33 trillion in its built assets, a total exceeding all other economies combined. The growth is evidence of China’s unprecedented level of investment in its infrastructure – 9% of GDP – which dwarfs global competitors like the United States, which currently invests just 2% of GDP.

China’s heavily investment-dependent growth model means that by 2025 its built asset stock will be worth over double that of the United States, and will exceed in size those of the next four economies combined.

Tom Morgan, vice president, head of business advisory, North America at Arcadis explains: “A prosperous society is underpinned by a well-developed built environment that meets the needs of its people and economy. Therefore, a strategically planned, highly developed and well maintained built environment is critical to the economic and social success of a nation.

“Developed economies have experienced a long-term stagnation and decline of their built asset stock, as aging infrastructure falls into disrepair and investment fails to keep up. This decline puts even more urgency on public owners to find creative ways to attract finance, make smarter decisions regarding the maintenance of existing assets and to maximize every dollar spent – the whole asset lifecycle must be considered to meet society’s needs.

“China’s ranking this year marks a profound change in the global league table of the world’s wealthiest built asset nations. However, with so much global uncertainty from financial imbalances, unprecedented currency volatility and crashing commodity prices, even China and its fast-growth neighbors will need a renewed focus on quality over quantity.”

The Index notes that while the United States’ built asset wealth embedded in real estate has demonstrated solid long-term growth, public infrastructure has not seen the consistent funding and policy needed to build investor confidence in such long term projects. In addition, the report notes that the United States needs to find ways to maintain the integrity and service levels of its aging asset base for less money.

The Global Built Asset Wealth Index shows a dramatic shift of wealth to emerging economies, such as Indonesia and Thailand, with the traditional economic superpowers – the G7 – showing a net decline in the value of their built assets since the 2013 report. Structural assets depreciate at a rate of around 5% per year, meaning this level of investment is the minimum required to maintain the status quo, a figure equating to $1.4 trillion in the United States.

In Europe, the almost decade-long economic slowdown has also had the negative effect of holding back investment.

The top ten nations in the Arcadis Global Built Asset Wealth Index are:

 

Rank	Country	2015 (US$)	Ranking change from 2013
1	China	47.6tn	+1
2	USA	36.8tn	-1
3	Japan	18.2tn	=
4	India	15.2tn	=
5	Germany	10.2tn	=
6	Russia	8.4tn	+3
7	Italy	7.914tn	=
8	France	7.912tn	-2
9	South Korea	6.1tn	-1
10	Brazil	6tn	+3

The per capita leaders are all Asian economic centers, with Singapore ($191,500 per person) Hong Kong ($160,000), Japan ($143,500) and UAE ($140,500) making up the top five behind Qatar ($198,000). When China’s vast built asset wealth is split across its 1.4 billion people, its per capita ranking, at just $34,000 per person, falls to 24^th in the world, behind Chile ($48,000), Mexico ($47,500) and Thailand ($44,500).

Globally, the largest depreciation of built assets was Japan, which has lost $4.6 trillion in built assets since 2000. All European advanced nations underinvested between 2012 and 2014 resulting in an overall decline in infrastructure. However, as a proportion of total built asset stock, Germany’s decline of 21% is the most substantial over this period. Other developed economies to have undergone significant net de-investment since 2000 include the Netherlands (-5%), the UK (-8.9%), France (-10.2%) and Russia (-18.7%), while the U.S. stock has remained largely constant (-0.8%).

The full report can be downloaded here www.arcadis.com/builtassetindex