Hard Landing

A hard landing refers to a marked economic slowdown or downturn following a period of rapid growth.

The term "hard landing" comes from aviation, where it refers to the kind of high-speed landing that – while not an actual crash – is a source of stress as well as potential damage and injury. The metaphor is used for high-flying economies that run into a sudden, sharp check on their growth, such as a monetary policy intervention meant to curb inflation.

The Federal Reserve, for example, has quickly hiked interest rates at several points in its history, sparking recessions multiple times in the 20th century.

Recently the term has most often been applied to China, which has enjoyed decades of preternaturally high gross domestic product (GDP) growth rates that – to some observers – have set it up for a hard landing. High levels of debt, particularly at the local government level, are often pointed to as a potential catalyst for a downturn, as are high property prices in many Chinese cities.

In late 2015, following a rapid devaluation of the yuan and softening trade volumes, many observers feared a Chinese hard landing: Société Générale put the odds of at 30%. Trade volumes recovered and currency markets stabilized, but a Chinese recession – or more probably, a steep fall in the growth rate – has the potential to hit commodity producers hard, with knock-on effects for the entire global economy.