As far as financial market duels go, China versus some of the world's most storied hedge funds is as big as it gets.

Money managers making bearish bets against the yuan, including top investors Kyle Bass, David Tepper and Bill Ackman, are pitted against Chinese policymakers who are trying to manage a more orderly decline of the currency, the Wall Street Journal (WSJ) reported at the weekend.

According to the WSJ report, some of the traders are penciling in a decline in the yuan of as much as 40 percent.The currency has already fallen about 5.6 percent against the dollar since August, when a sharp devaluation by the People's Bank of China (PBOC) roiled markets, to trade at 6.5790 on Monday.

Which side wins control of the yuan's direction will have a profound impact on global financial markets as well as the well-being of countries that have benefited enormously from the frenetic growth in the Chinese economy.

The yuan has been hammered in recent months by a confluence of factors. China's once booming economy is now growing at its most feeble pace in a quarter of a century and capital outflows have accelerated. The PBOC is lowering borrowing costs just as the U.S. Federal Reserve has begun lifting interest rates.

And because the yuan, or renminbi as it's also known, is tethered to the greenback, it has gained against peers such as the Japanese yen, despite falling against the dollar itself.

Confidence in the ability of policymakers to handle the crisis has also wavered amid several policy missteps, helping create a toxic mix has emboldened investors to bet that the yuan is heading for a precipitous fall.