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China poses 'biggest risk' to global businesses

A thermal power plant discharging heavy smog into the air in Changchun, northeast China's Jilin province.
STR | AFP | Getty Images

The days of business leaders and company execs trumpeting their exposure to the world's second largest economy appear to be over.

After years of double-digit growth, China is slowing and its growing pains have triggered a rethink among businesses around the world.

A survey of 51 chief financial officers (CFOs) from Europe and Asia by CNBC has revealed that the majority believe a slowdown in the country is now the biggest threat to their business. Sixty percent of respondents said China was the key threat, while 20 percent said they were concerned about an emerging market downturn.

Fears of a "hard landing" in China are not new but have come to a head this year following some disappointing economic data, a sharp slide in the country's stock markets and a decision last month by authorities to devalue the Chinese currency – the yuan.

The Shanghai Composite index - still in its relative infancy compared to its U.S. counterparts - screamed higher by 54 percent up until the middle of June. After hitting a peak this year of 5,166 points, the benchmark tanked 38 percent in 57 days, erasing all the gains for 2015.

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Analysts believe the blue-chip index is now moving independent of economic fundamentals and a view that not enough is being done by policy makers has derailed global asset markets. Chinese stocks may not be directly linked to the underlying economy, but business execs have been quick to talk of their relative insulation from any slowdown and their continued bullishness on emerging economies.

"We've seen the stock market excesses in China, the stock market was overblown. There's been a correction, the economy is under pressure there, [but] in my view it's a cyclical swing," WPP CEO Martin Sorrell told CNBC in August.

Meanwhile, other analysts have questioned how big business ever ended up relying so much on the Asian powerhouse.

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"I think it's ridiculous that the global economy, Europe, Japan, the U.S., we're all actually looking to China to drag us out of this. That should tell us something right?," Bob Janjuah, a senior independent client adviser at Nomura, told CNBC Tuesday.

Despite the threat that it poses, most chief financial officers said that a Chinese devaluation of the yuan wouldn't affect their exports to the country or even their ability to compete with Chinese exports.

Nonetheless, 30 percent of respondents said that China's currency devaluation would "slightly" reduce the competitiveness of their own exports against China's, and 20 percent expected a "slight" reduction in exports to China itself.

For Russian aluminium producer Rusal, the devaluation could make Chinese companies more competitive, but is unlikely to have a major impact on its business as the yuan devaluation was only small, according to the firm's CFO.

"We are competing in certain markets with China such as…foil products, so Chinese currency devaluation will make Chinese companies more competitive and will make it harder to compete with them," Alexandra Bouriko, CFO of Rusal, told CNBC in a TV interview on Monday.

"But at the moment the devaluation is just 2.5 percent and China said on numerous occasion that they are not going to enter this devaluation war or currency war. So if this level the current level is sustainable we believe it will not really impact the companies like ours."

Full survey results below: