China to overtake US in built assets

The US was the wealthiest nation in terms of built assets during 2012, but China is gaining rapidly and could become the owner of the world’s biggest built wealth as early as 2014, a report published today suggests.

It found that in Europe, built asset growth was expected to be subdued at around 2.7% over the next decade, and in some struggling Eurozone economies, investment was forecast to fall short of asset depreciation, leading to a fall in the built asset stock.

The Global Built Asset Wealth Index demonstrates the distribution of the world’s wealth in terms of the physical assets which contribute to a nation’s productivity. The index illustrates the accumulation of buildings, infrastructure, and machinery and equipment to unveil the economic divergence between 30 countries that represent 82% of global GDP. It also highlights how these disparities are predicted to evolve in future.

The index has been produced by global built asset consultancy EC Harris, with research conducted by the Centre for Economics & Business Research (Cebr).

EC Harris said the total stock of built assets provided an indication of the wealth which a country had accumulated and, therefore, the resources which it could draw on for generating economic growth.

It said built assets could be thought of as all tangible fixed capital investment, including infrastructure investment, residential and non-residential construction, as well as investments in plant and machinery, and improvements in natural assets, such as land reclamation.

Simon Rawlinson, head of strategic research and insight at EC Harris, said, “Indicators like GDP (gross domestic product) and unemployment, which are traditionally used to define a country’s performance, only tell one side of the story.

“While GDP quantifies national income, our analysis of the total stock of built assets provides an indication of accumulated wealth and the resources which can be drawn on to fuel future economic growth.”

Across the 30 countries included within the analysis, total built asset wealth was estimated at US$193 trillion (€146.4 trillion) in 2012 – almost three times the US$68 trillion (€51.6 trillion) produced in GDP by these countries in the same year.

Variations

The report said there was significant variation in the stocks of built assets across the world. With an estimated built asset wealth of US$39.7 trillion (€30.1 trillion), the US had the largest stock of built assets in 2012, followed closely by China with an estimated stock of US$35.4 trillion (€26.8 trillion).

Taken together, the USA and China were said to account for 38.9% of total estimated built asset wealth in 2012 in the 30 country sample.

At the other end of the scale, Qatar was estimated to have accumulated built asset wealth of US$300 billion (€227.5 billion), the lowest total of all the countries under analysis.

EC Harris said that despite having a repu­tation for heavy investment in construction, the relative size of the Qatari economy meant that, on the global stage at least, the total value of Qatar’s built assets were relatively low. Larger built asset stocks were to be found in a mixture of established developed economies, such as Japan and Germany, and in populous emerging countries, such as India and Indonesia.

Countries with higher levels of built assets should be well-placed to generate greater levels of economic output and therefore greater levels of income, reflecting the distribution of global economic power, said EC Harris.

Europe

In Europe, built asset growth is expected to be subdued at around 2.7% over the next decade. For some struggling Eurozone economies, investment is forecast to fall short of asset depreciation, leading to a fall in the built asset stock.

The report predicted that over the next ten years, divergent trends across regions would sustain an on-going structural shift in the distribution of built asset wealth across the globe.

The Asian countries in the sample had the largest stock of built assets in 2012, estimated at US$84 trillion (€63.7 trillion). By 2022, this is forecast to increase to US$137.4 trillion (€104.2 trillion) – a rise of 62.9%.

Similarly, North America was expected to perform strongly – by 2022, built assets were being forecast to increase by 19%, rising to US$52.7 trillion (€40 trillion). Growth in North America is therefore forecast to outpace that in the Latin American countries examined, where strong growth of 16.3% is expected over the coming decade, with combined built asset wealth in Brazil, Chile and Mexico reaching US$12.1 trillion (€9.2 trillion) in 2022.

It is in the Middle East and Africa, however, where EC Harris expected the most significant growth. Taken together, the stock of built assets in Egypt, Qatar, Saudi Arabia, South Africa and the United Arab Emirates is expected to increase by 63% to US$8.7 trillion (€6.6 trillion) in 2022, just outpacing growth in the Asian economies.

By contrast, the built asset stock of European countries within the sample was forecast to increase from US$48.7 trillion (€36.9 trillion) in 2012 to US$50.1 trillion (€38 trillion) in 2022, representing growth of just 2.7%.

The report said it was clear that growth in Europe was expected to be dwarfed by that elsewhere.

“This will have implications beyond the next 10 years,” it said. “Investment in built assets now lays the foundations for future GDP expansion and, therefore, impacts on the potential for further investment in the years ahead.

“Of course there is causation in both directions, but this evidence suggests that European economies are likely to be outpaced by emerging economies – as well as the more developed economies of North America – for many years to come.”