The global economy is facing a period of "difficult transition" as it moves from an industrially-based economy to an information economy, says Colonial First State Global Asset Management (CFSGAM).
In a series of nine research papers entitled The Great Transition, CFSGAM argued that the information economy will herald a better global economy, but only after a difficult conversion period.
The information economy will be driven by China and the IT sector as a whole (in particular, the phenomenon of 'mobile' internet), said the report.
The transition will involve a dramatic shift in the production side of the economy, which in turn will impact capital markets and economic policy, CFSGAM said.
As a result, investors need to take into account structural forces that are likely to impact markets in the future, CFSGAM head of economic and market research Stephen Halmarick said.
Further technological advancements will have “implications for manufacturing, living standards and capital markets,” senior analyst James White added.
“What we have found is that as the cost of information falls, industrial markets are being re-shaped; traditional industries can ‘do more with less’; and the labour market is moving from manufacturing towards services,” said Mr White.
“Some of the most painful change will hit capital as it becomes either redundant or re-shaped and replaced by capital light networks.
“Rather than focus on competitiveness, a more sustainable characteristic for a national economy may be attractiveness.
“An economy’s future success might be more dependent upon its ability to attract people and utilise capital, rather than its ability to make widgets.
“Most importantly, policy must better understand and seek to influence the positive growth of the service sector,” said Mr White.
The nine-part report series is divided into three sections which explore the changing global economy through the lens of productivity, capital consequences and future growth.