Accounting for the risk of China

China's stock market rout gets the blame for the worst start ever of a new year for the Standard & Poor's 500 index. Of course, a stock sell-off that erases almost $1 trillion of investors' money has many causes, but none simpler than more sellers than buyers.

Pessimism spreads faster than hopefulness. Emotions run fast and hot while rationality is calm and cool. Investing is no different. The Shanghai Composite Stock Index's drop of more than 10 percent in just a few days last week is breathtaking, no doubt. The losses are real. And painful. However, long-term investors will be able to assess the Chinese troubles with more clarity in the week ahead.

Economic data out of China can be suspect. The central government continues intervening in its stock and currency markets. So one of the best places to get a gauge on the trouble in China will be inside the financial results of American companies doing business there. Companies begin reporting fourth quarter results in the week ahead. The threat of China's troubles will be larger than the business risk for most companies.

In 2014, Intel generated 20 percent of its revenue from China-based customers. However, that doesn't mean those companies were selling solely to Chinese customers. Intel releases its fourth quarter results Thursday. By contrast, 25 percent of Apple's revenues come from China. More than half of Yum Brands (KFC, Taco Bell, Pizza Hut) sales are in China.

In September, after the August sell-off in China triggered a drop in U.S. stocks, JP Morgan estimated American companies generate less than 2 percent of their sales from China. Accounting for the financial risk of China may be easier than the emotional risk it poses for investors.

Tom Hudson, financial journalist, hosts "The Sunshine Economy" on WLRN-FM in Miami, where he is the vice president of news. Follow him on Twitter@HudsonsView.

This story was originally published January 8, 2016 at 5:46 PM with the headline "Accounting for the risk of China ."