Thursday, 1 March 2018

The Benefits and Costs of Shifting Wealth to OECD Countries

The term ´Shifting Wealth´ has been criticised for conveying a dangerous notion of zero-sum game; dangerous because the rise of protectionism and nationalism in some OECD countries risks bringing the rise of emerging countries and the corresponding meltdown of global poverty to an end. ´Shifting Wealth´ is a shorthand term to describe the gravity shift of the world economy toward the East and the South, in terms of flows (GDP share, South-South trade and finance) and of stocks (changes in net foreign assets, built-up of reserves and SWF assets)[1]. Zero-sum mentality has it that lower poverty in China and in the developing world causes poverty to rise in advanced countries, for example in the United States. Rather than taking satisfaction in global economic development and the unprecedented business opportunities and new jobs it brings also to the OECD, economic growth in the South is regarded by some as a threat. The real threat, however, is a global trade war.

What is often missed in analysing globalisation is that the rise of emerging countries has gone and is still going through three distinctive phases. Policymakers risk foregoing the benefits of globalisation because they react to the first opening phase of the 1980/90s while important wage and price trends are now being reversed as a result of changes in the global labour supply and of China´s fast transition to a ´New Normal´.

The benefits of ´Shifting Wealth´, including to the OECD, are well rehearsed. The rising living standards that came with globalisation initially lent widespread support to the view of trade as a key engine of economic growth, North and South. The expansion of global value chains (GVCs) became a strong driver of productivity, boosting intermediate trade – a boon for OECD producers of equipment and consumer goods. Formerly poor countries used their exports for higher consumption and thus imports, not least for OECD-based luxury brands. Intensified specialisation meant an improved allocation of resources also in OECD countries, with capital and jobs shifting away from their least competitive uses and lowest added value toward higher-income sectors. Consumers in the OECD benefitted from a higher purchasing power of wages as low-skilled goods prices dropped. They also enjoyed more product choice. The deterioration of China´s terms of trade through the mid-2000s indicated that China´s exports made the world better off[2]. Improvements in the range and quality of exports, greater technological dynamism, better prospects for doing business, a larger consumption base – all these factors have created substantial welfare benefits for OECD countries. Overall, Shifting Wealth is a win-win setting.

The problem is that the benefits of Shifting Wealth have been unevenly distributed. Many of the major economic trends of our time - globalisation, digitisation and robotisation - are good for society on average, but not automatically good for everyone. Especially in the labour market, they also generate losers. Besides the fear of mass immigration, these globalisation losers can play a decisive role in the rise of populism. An appropriate policy answer in advanced countries requires a sound diagnosis that distinguishes three phases of globalisation.

The first phase of Shifting Wealth in the late 20th century went along with low-skill wage pressures and higher returns to capital in OECD countries, giving impetus to Piketty´s r>w[3]. The opening of China, India and the former Sovjet bloc had effectively doubled the pool of low-skilled labour. The shape and speed of the newcomers´ integration into the world economy then depended importantly on the transfer of labour from mostly rural low-productivity areas to mostly urban high-productivity sectors. A core model of economic development, the Lewis[4] or surplus labour model, provides the analytical tools: The modern sector – and by extension the world economy (!) – faced for a while an ´unlimited supply of labour´ at wages not far from the subsistence level. As predicted by the Stolper-Samuelson theorem, the labour supply shock led to a drop in the price of wage-intensive goods that caused a reduction in the equilibrium wage or, alternatively with low wage flexibility, job losses.

While unemployment in certain sectors or regions in OECD countries have resulted to a large extent from technological changes rather than from trade, the two drivers are not always easily disentangled. In the OECD countries, both globalisation and technological change affect a middle class that is often marked by industry, which has lost its good jobs or is afraid of imminent job losses[5].

That it is the middle class in OECD countries that has been affected by the initial labour-supply shock has theoretical and empirical support. Krugman (1994) has shown early on that competition will ensure the ratio of the wage rate in the OECD area to that in China to equal the ratio of labour productivity in those sectors in which workers in the two regions compete head to head[6]. Poor countries produce low-tech goods more cheaply, and the fall in the price of those goods will raises real wages in the OECD. So in the past, surplus labour in China and elsewhere has benefitted in particular the low-income segments in the importing countries as low-tech products weigh relatively heavily in their consumption. The key problem, however, for the middle class is the structural change that results from trade pressures in intermediate sectors. Some of these sectors, such as textile, steel and electronics have been shrinking in the OECD as a result of Shifting Wealth.

The empirical evidence that the distribution effects of globalisation and technological change have put a strain on the OECD middle-class has been provided by the “elephant graph” in a paper by Lakner and Milanovic (2013)[7]. The graph shows income gains at each point of the global income distribution for the 20 years spanning the fall of the Berlin Wall to the 2008 financial crisis. The graph has recently been updated for the World Inequality Report 2018 by a team of Berkeley and Paris School economists for the period 1980 to 2016. They identify the trough of low growth with the bottom 90 percent in the United States and Western Europe (the global 50-95 income percentile), while higher income growth has been appropriated by the Asian middle class and the global top 1% income group[8]. The affected middle class in the OECD constitutes a lot of frustrated voters…

The second phase of Shifting Wealth, from 2000 to the 2008 Global Financial Crisis (GFC), saw pervasive convergence of poor countries largely due to increasingly China-centric growth and higher raw material prices. While oil and metal producers benefitted, the majority of OECD countries, being net commodity importers, suffered terms of trade losses. Simultaneously, as a result of reversals in the current account of balances of payment, net foreign assets positions morphed: China and oil producers extended their net credit whereas the US net foreign debt position bulged. As global trade became increasingly imbalanced, China became singled out as a currency manipulator and predator. Deindustrialisation in some OECD countries became wrongly attributed to external deficits. However, it was not ´Shifting Wealth´ that caused US deficits on its current account. During the 2000s, current account surpluses of around 100 countries had largely arisen in response to the US current account deficit – the excess of US investment over US savings.

 As a result of its external deficits, the US risked losing economic, political and normative influence on the world stage. In other words, it risked to become a ´normal´ country, frustrating those who claimed its exceptionalism[9]To be sure, there are some global zero-sum settings. A rebalancing of influence toward China & Co. has seen the relative weight of the advanced countries diminish; and there are pressures for a redistribution of the stock of global commons, particular in relation to climate change and extraction rights for exhaustible resources.

Figure 1: China´s Working-Age Population is Shrinking

.Source: Source: United Nations, World Population Prospects: The 2017 Revision

The third phase of Shifting Wealth has since the 2008 GFC witnessed a reversal of these trends in the terms of trade as China is transforming its production and trade patterns toward consumption, away from investment and intermediate GVC trade. As China´s formerly ´unlimited supply of labour´ has been largely absorbed and its population is ageing rapidly, and as India´s fertility rate has come down, the growth of global labour has peaked[10]. China´s working-age population is projected to shrink by 400 million in the 21st century (see Figure 1). Sub-Saharan Africa and India can numerically offset these demographic trends for the next couple of decades. Economically, the offset is much harder. A slowing working-age population will increasingly be mirrored by a rising middle-class consumer population. This stimulates ´ordinary´ global trade fueled by higher consumption, whereas intermediate processing trade has started to stagnate (Lemoine and Ünal, 2017)[11]. Asia-driven wage pressures felt in the OECD are probably past, with China´s wages rising rapidly in both dollar and yuan terms (Figure 2).

Figure 2: China´s Manufacturing Yuan Wages, 2000-2018


Longstanding demographic developments that caused income and wealth inequality will now change. This is supported by the fact that several trends, which have been valid for forty years since the entry of post-communist states and emerging Asian countries into the market-economy organized world economy, have ended. Demographic prospects have Goodhart and Pradhan (2018) forecast for the coming decades: The ageing and shrinkage of the world's labour force (outside the Sahel Zone) and thus a higher share of wages in world income;  the decline in massive outsourcing to China and Eastern Europe, thus putting an end to price deflation for labour-intensive goods and hence provide scope for a more restrictive monetary policy in advanced economies, probably leading to asset price deflation; and the trend reversal in the global development of factor relations with an increase in the capital ratio in production and a reduction in returns on capital.

The negative distribution effects of Shifting Wealth are therefore likely to abate. Protectionist measures by OECD countries will not only hurt the emerging countries but also OECD countries themselves, especially if they lead to a global trade war. Cutting off trade is not the answer: Protectionism hurts those it is supposed to protect. To the contrary, “making trade work for all” is required[12]: Compensate the losers, not just with transfers from more progressive taxes. Active labour market policies, skills upgrading and regional policies (Südekum, 2018, op.cit.) as distribution tools are important policy tools as well. Rather than see the “rise of the rest” in terms of the “decline of the west”, policy makers should recognise that the net gains from increased prosperity in the developing world can benefit both rich and poor countries alike. Trade unions in the OECD area will find it easier to negotiate decent wages than they did until recently, with corresponding benefits for PAYG pension schemes.

[2] Martin Wolf (2006), “Answer to Asia’s rise is not to retreat”, Financial Times, 14 March.
[3] Thomas Piketty (2014), Capital in the 21st Century, Harvard University Press.
[4] Arthur Lewis (1954). "Economic Development with Unlimited Supplies of Labor". The Manchester School. 22: 139–91. doi:10.1111/j.1467-9957.1954.tb00021.x.
[5] Jens Südekum (2018), „Besser als das Arbeitslosengeld“, Frankfurter Allgemeine Zeitung, 23 February.
[6] Paul Krugman (1994), “Does Third World Growth Hurt First World Prosperity?”, Harvard Business Review, July.
[7] Christoph Lakner and Branko Milanovic (2013), “Global Income Distribution: From the Fall of the Berlin Wall to the Great Recession”, World Bank Policy Research Working Paper 6719
[9] Stephen Cohen and Bradford DeLong (2010), The End of Influence: What Happens When Other Countries Have the Money, Basic Books.
[10] Charles Goodhart and Manoj Pradhan (2017), “Demographics will reverse three multi-decade global trends“, BIS Working Paper No. 656, Bank for International Settlements.
[11] Francoise Lemoine and Deniz Unal (2017), “China's Foreign Trade: A “New Normal”, China & World Economy, 25.2: 1-21. DOI: 10.1111/cwe.12191
[12] OECD (2017), Making Trade Work for All, OECD.

Monday, 12 February 2018

From Copycat to Global Innovation Driver: Rethinking Technology Transfer with China

From Copycat to Global Innovation Driver: Rethinking Technology Transfer with China, by Thomas Bonschab*

Technology transfer with China seems to have only one direction: Western industrialized countries supply, and China takes whatever it needs. This process does not enjoy a good reputation. Public media are constantly coming up with reports that Chinese companies are blatantly stealing Western technology as part of industrial espionage or breaches of contract. Because many of these stories are well-documented, they have largely sapped the mood towards China.
More heavily weighs the accusation that China operates on a distorted legal framework in order to acquire the desired technology. In fact, Western companies are still being forced into joint ventures with minority share in almost all key sectors, if they want to gain market access in China. Public tenders tend to be designed to grant approvals only when relevant technology is deployed and produced locally with Chinese partners (often assigned by the local administration). In addition, many international investors complain that they are compelled to transfer construction plans to Chinese institutes, thereby giving away their intellectual property. Similar charges comprise the requirement to provide training programs for local employees. And most notably, Chinese authorities are promoting, more or less transparently, M & A processes in the countries of origin of high technology. In Germany, the cases KUKA and Aixtron were widely and critically discussed.
Hence, Western governments are becoming increasingly nervous and trying to strengthen their position on China. Current messages from the US spur concerns for a new trade war. But even the more moderate EU and Germany are trying to impede market access for Chinese players with new foreign trade regulations. It is openly discussed whether China should be granted the status of a market economy due to its industrial policy.

Towards another realignment against China
No doubt, there are good reasons to take action and realign Western policy towards China. However, the approach adopted by most Western countries is problematic. Sure, it may be intuitively reasonable to look at China from today’s perspective or from the perspective of the past 10 years. But there is an inherent flaw in this view. From this perspective, China may appear as a new economic superpower, but still as a technology-developing country that can only acquire knowledge and innovation through unfair ways. From this point of view, the established Western self-understanding of technological superiority is not shaken at all.
This attitude will soon have to be corrected. The real momentum of China’s development is not only to be found in its impressive growth rates of its gross national product. It is rather in its ability to transform itself into a modern knowledge society and thereby to develop so-called indigenous technologies. China may still enter the international stage as a copycat, but not for long. Soon, technology transfer from China to the West is likely to be as common as the other way around. At least in selected sectors of the economy.

Here's a set of common sense considerations that make this trend visible.
Example 1: China as a Land of Inventions: In 1996, the share of research and development in gross national product was just over 0.5%. Although this was above the average of the least developed countries (LDC) of 0.2%, it was far from modern industrialized nations. Since then, annual spending has been growing at an average rate of 22%.

Source: Compiled from United Nations Educational, Scientific, and Cultural Organization (UNESCO) Institute for Statistics.

The catching-up process is unmistakable. In 2015, China has already invested 2.07% of gross national product in research and development. Germany in comparison: 2.87%. As early as 2006, the State Council announced in its "Outline of National Medium and Long Term Science and Technology Development Plan (2006 - 2020)" the target of 2.5% of gross national product for 2020. Since China does not understand such publications as a poem to the people, but instead as a tough promise, one must assume that in the next 10 years, the level of Germany and the United States will be reached. Only the special cases of technology countries such as South Korea (4.2% in 2015), Israel (4.3% in 2015) or Japan (3.3% in 2015) will then stand out.
It is noticeable that we only talk about aggregated data. In key sectors, defined by the Chinese government as part of its China Made in 2015 innovation program, the numbers are likely to be even more significant. New information technologies - notably artificial intelligence and aerospace sectors or biomedicine and the development of high-end medical devices - are investing heavily in achieving rapid independence from Western technologies. The true story is that China will most likely develop indigenous technologies in key sectors, beyond the picture visible when looking at aggregate data.
Example 2: China in patent fever: According to a recent survey by the World Intellectual Property Organization (WIPO), no country registers more patents than China. In fact, as many as the US, Japan, South Korea and the EU taken together.

Trend of patent applications in the five main WIPO offices
Source: WIPO 2016: World Intellectual Property Indicators 2016, Economic and Statistics Series, p. 23

It may well be objected that many of the registered patents are destined solely for the Chinese market, so that not all patens have the high quality to be found in technology driven countries like Germany. Nonetheless, this shows how much China is now presenting itself as a land of inventions and ideas.
The dynamics also suggest the direction in which the currently very critical debate with China on the protection of intellectual property rights (IPR) will develop. A country with so many patents will want to protect them, otherwise they are no value. The according laws in China already exist. Only their consistent implementation by the authorities is still a major challenge. Over the years, this is likely to be remedied. Ironically, in the long run China could become a global protagonist of IPR. Historically, that would follow the example of Japan, South Korea and other countries.

Example 3: "Speed ​​to Market" - from invention to product development: In this core competency for a successful technology transfer, China has already achieved world leadership. Hardly any population has more affinity for new technologies than Chinese. Customers demand constant product adaptation, using social media and the Internet. Successful entrepreneurs have to listen to that voice, or else they disappear quickly from the market. No doubt, poor product quality and product safety are commonplace in China, but are also rigorously punished by customers.
The speed and mentality of Chinese entrepreneurs are set accordingly. Lengthy strategy processes and consultant assignments are not part of Chinese business life. Innovation pressure also comes from the many government programs that operate either through regulations (such as environmental regulations) or market incentives. Market opportunities in the context of "Made in China 2025" or the "One Belt, One Road" program call for maximum flexibility and risk-taking even from the large state-owned enterprises.

Example 4: Incentives for returning intelligence: About 80% of overseas students return to China. That was not always the case. At the beginning of the 2000s, studying abroad, primarily in the USA, was seen as a perspective for a better life. Qualifying Chinese students was very beneficial for the hosting countries, both in terms of financing academic institutions and in terms of developing new technologies, using some of the most gifted minds. This trend has reversed dramatically in recent years.

Source: National Bureau of Statistics of China

Arguably, this development may be caused by a tightening of visa requirements in some countries. The decisive factor, however, is that China offers a more attractive working environment than in the past, especially in key industries. One of the most striking developments is the emergence of the many start-up centers, which were built especially for returning students. At the end of 2016, there were 347 of these centers, with more than 27,000 companies. A technology pool for the future. A perhaps a role model for Western industrial countries.
These are just a few examples of the dynamism with which China is currently developing into a global innovation driver, stripping off its role as a copycat of Western technology. It is apparent that the country will set the tone in future, at least in some sectors. Not just because of its market size or its political chutzpah, but because of its technological superiority. China builds up the necessary resources for this change at a historically breathtaking speed. The days are counted for Western countries to simply blame China as a technology thief.
In the future, therefore, the issue of technology transfer will probably be rated differently. For example, many German “hidden champions” and research institutions in the fields of automation, digitization and Industry 4.0 will step up their development in China in order to be able to sail hard on the wind. It is not only the internal market of China that is exciting, as hitherto. It is also the Asian and global programs along the Silk Road that are perceived as business opportunities. More fundamentally, however, China is above all a new, global competitor in the high-tech sector.
So where is the journey going?
The good news is that German and other Western technology companies are still in high demand in China. Many Western private sector companies are already underway in developing new business models in dealing with China. Re-engineering of technologies should soon go both ways. In fact, there is a lot to learn from China. WeChat, for example, has become a more powerful tool than WhatsApp, Alibaba and other companies have set similar signals. Looking at the Chinese Mittelstand to enter global markets, it is likely to get used to such cases.
At the political level, one can only hope that the approach of co-operation on equal terms and mutual learning curves will not remain a simple rhetoric. European and German advocacy for more fairness in international competition is justified and necessary. The foreclosure of their own markets by means of new foreign trade regulations, however, is rather a step backwards.

*Thomas Bonschab has worked many years for the Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH in Beijing on bilateral projects between German and Chinese ministries. In 2014, he founded the company TiNC International GmbH together with his Chinese business partner. His company deals with industrial projects in the fields of automation, digitization and industry 4.0, as well as educational cooperations between China and Germany. Thomas Bonschab runs the blog Weltneuvermessung (, joint with Robert Kappel and Helmut Reisen, where this post appeared first in German.

Monday, 5 February 2018

China´s Development Finance – A Boon for Africa

Large emerging countries have become important development partners in recent decades. They are outside the old donor cartel of countries in the Development Assistance Committee (DAC) at the OECD. Countries that provide development partnerships but do not belong to the DAC are Brazil, China, the Gulf States, India, Malaysia, the Russian Federation and Thailand. These countries now spend billions of dollars throughout the developing world to build roads, dams, bridges, railways, airports, seaports, and electricity grids. These projects, often in countries left orphan by Western donors because of alleged governance problems (which is little reason of concern when the country is a Western ally), have been greeted with suspicion (´rogue aid´): Sour grapes for Western donors - who from the 1980s tended to spend money more on conferences, consultants and governance rhetoric – to see new emerging partners in their former ´chasse gardée´. The rise of emerging partners could also explain the increasing support of the DAC for blended finance, in order to lever meagre ODA resources with private finance, which won´t work for low-income Africa[1].

Western donors and lenders are generally skeptical about China’s efforts to assume a leadership role in providing global infrastructure, and point to the benefits international competitive bidding rules and environmental and social safeguards provide to ensure responsible and sustainable implementation of infrastructure projects. And Western politicians and media have warned African counterparts that China may be motivated not by a desire to improve the lives of ordinary Africans but more by a desire to gain access to the continent’s natural resources.

Table 1. Recipients of Chinese Official Finance, 2000 - 2014
World Region
Total, $bn
 ODA Terms, %

No. of Projects



Eastern Europe


Latin America


South Asia


Southeast Asia


Other Asia


Middle East






Source: Aid Data (Dreher et al., 2017); my calculations.

China, in particular, has positioned itself as a leading global financier of the “hardware” of economic development. Unfortunately, China does not disclose comprehensive or detailed information about its international development finance activities. However, Aid Data (Dreher et al., 2017)[2] have recently constructed a dataset with a new methodology for tracking underreported financial flows. This paper introduces a new dataset of official financing—including foreign aid and other forms of concessional and non-concessional state financing—from China to 138 countries between 2000 and 2014.
According to these new data, the scale and scope of China´s overseas infrastructure activities now rival or exceed that of other major donors and lenders. Between 2000 and 2014, the Chinese government committed more than $350 billion in official finance to countries and territories in Africa, Asia and the Pacific, Latin America and the Caribbean, the Middle East, and Central and Eastern Europe. Transport and power generation are the two main sectors financed. Chinese cooperation also invests significantly in health, education, water and sanitation, agriculture, and other social and productive sectors.
Chinese official finance consists of Official Development Assistance (ODA), which is the strictest definition of aid used by OECD-DAC members, and Other Official Flows (OOF). China provides relatively little aid in the strictest sense of the term (development projects with a grant element of 25 percent or higher). A large proportion of the financial support that China provides to other countries comes in the form of export credits and market or close-to-market rate loans. Table 1 provides a calculation of the weighted average of China´s development finance that was extended at concessional ODA terms: 24.5 percent for the period 2000 – 2014.
Table 1 shows that Africa received most from Chinese development finance during the period 2000-14 – in terms of amounts, degree of concessionality (percentage share at ODA terms) and number of projects. More than a third of overall Chinese official finance went to Africa during 2000 and 2014. Zimbabwe, Angola, Sudan, Tanzania, Ghana, Kenya and Ethiopia headed the ranking of Africa´s recipients in number of projects. Africa has received more Chinese ODA-like finance than all other developing regions in the world combined, almost 80% of Chinese aid.
But did Africa benefit from Chinese aid? Dreher & Co. show that Chinese official development assistance (ODA) boosts economic growth in recipient countries. The popular claim that significant financial support from China impairs the effectiveness of grants and loans from Western donors and lenders is clearly rejected. The Aid data paper also benchmarks the effectiveness of Chinese aid vis-á-vis the World Bank, the United States, and all members of the OECD’s Development Assistance Committee (DAC). The results indicate that Chinese, U.S., and OECD-DAC ODA have positive effects on economic growth, but no robust evidence is found that World Bank aid promotes growth. The Aid Data research suggests that ODA compatible aid helps growth, despite the many (populist?) claims to the contrary from the likes of Dambisa Moyo.

By contrast, it is found that, irrespective of the funding source, less concessional and more commercially-oriented types of official finance do not boost economic growth. Too bad DAC donors are becoming so stingy. DAC Country Programmable Aid (CPA), the (most valuable) portion of aid that recipients´ budgets can really count on (because it excludes OECD-based spending for conferences, consultants, migrants, etc), has declined from 2014[3].

[1] Kappel, R. & H. Reisen (2017), The G20 »Compact with Africa«: Unsuitable for African Low-Income Countries, Friedrich-Ebert-Stiftung, Berlin.
[2] Dreher, A. et al (2017),  Aid, China, and Growth: Evidence from a New Global Development Finance Dataset, Aid Data Working Paper No. 46, William & Mary, October.

Tuesday, 16 January 2018

Shifting Wealth and Global Wealth Inequality

Piketty’s (2014) celebrated analysis has focused on wealth inequality within countries[1].  But world wealth inequality also depends on the rise or fall of wealth in different countries and regions. An important element in the current evolution of wealth inequality is the role played by the fast growing developing economies. The table below will show that Shifting Wealth seems to have contributed – as it did for global income equality – to slightly more global wealth equality. Since 2010, the Credit Suisse Research Institute’s Global Wealth Report has been the leading reference on global household wealth[2]. A wealth of data on household wealth throughout the world is available in the annual issues of the Credit Suisse Global Wealth Databook. It offers detailed country and regional information not available at present on

Net household wealth is defined as the marketable value of financial assets plus non-financial assets (principally housing and land) less debts. World total net household wealth has risen from $ 117 trillion end 2000 (a mean of $31,415 and a median of $1,867 for the 3.7 billion adults[3] alive then) to $ 280.3 trillion by mid-2017 (a mean $ 56,541 and a median of $ 3,582 for 5.0 billion adults).

Table 1: Net Household Wealth, % of world total

Asia-Pacific (ex Japan)
Latin America
Total South
North America
Total North

Over the period 2000-2017, net household wealth has indeed shifted South (actually more East than South). In relative terms, the group of rich countries has lost more than ten percentage points of the world household wealth. Consequently, global wealth inequality has been reduced during the 2000s as median levels of net household wealth are much higher in rich than in developing countries. Most of the shift toward the South occurred during the first decade when income convergence was rapid, not least due to booming raw materials. In the 2010s, by contrast, gains in the percentage share of world household wealth were given back by Africa and Latin America; only China kept on gaining a higher relative share in world wealth.

Table 2: Median Net Wealth per Adult, in constant $

Note: Asia-Pacific including Japan

For lack of data on standard deviation underlying the various data on household wealth, Table 2 does not provide evidence on skewness nor on Asia-Pacific excluding Japan. Still, Table 2 reveals that the first decade of the 21st century did not only lower global wealth inequality but also went along with remarkable gains in median wealth. Broadly, median net household wealth doubled in all non-OECD regions listed in Table 2 during the period 2000-2010. Since then (post the Great Financial Crisis; GFC), however, median household wealth only kept rising in China while it dropped sharply in Africa. Despite being shown in constant US dollar, the numbers may indicate that sharp real currency depreciation of local currencies in countries with net raw material exports have dented mean household wealth since the GFC and as a result of lower commodity demand by China, including by inflating household debt.

To sum up, the 2000-2010 episode of rapid income convergence of low- and middle-income convergence in the wake of China´s commodity-hungry growth spurt has not only lowered global income inequality. It also helped lower global wealth inequality, despite higher within-country income and wealth inequality. Median household wealth rose in all developing regions while it dropped or stagnated in Japan and North America. During the present decade, alas, Africa and Latin America have seen median household wealth levels drop again.

[1] Th. Piketty (2014), Capital in the Twenty-First Century, Harvard University Press.
[2] J. B. Davies, R. Lluberas and A. Shorrocks (2010):  Global Wealth Databook, Credit Suisse Research Institute. The same authors explain the estimation methodology and draw lessons learned about trends in the level and distribution of global wealth up to 2014 in “Estimating the level and distribution of global wealth, 2000–14”, WIDER Working Paper 2016/3, UNU-Wider.
[3] Defined as individuals aged 20 or above.