ETFs tracking China have rebounded the past few weeks after a nasty sell-off on fears the world’s second-largest economy was facing a full-blown credit crisis.

The iShares China Large-Cap (NYSEArca: FXI) is still down about 15% year to date with emerging market ETFs trailing the S&P 500 by a wide margin. [China ETFs Weak on Credit Fears, Economy]

“So is it still a good time to jump into China equities following its really bad month of June? A trend may be building that supports that take, at least based on the 10%+ improvement over the last few weeks that can be seen in a number of key China equity-based ETFs,” Daniel Sckolnik, senior analyst at Sabrient Systems, said in a note this week.

Despite the recent bounce, it’s been a tough year for FXI and other China ETFs on hard-landing worries. China’s GDP growth slowed to 7.5% in the second quarter.

“No doubt the 15% drop in the China’s Shanghai Composite Index during the month of June has frightened off a number of investors seeking entry, or perhaps re-entry, into the emerging markets arena, one within which China is still considered to be classified,” Sckolnik said.

“But all the fear generated from a government-initiated credit crunch that has caused the sharp sell-off, might be out of proportion to the current circumstances, possibly resulting in a reasonably good entry point into China equities via one of several regional ETFs,” the analyst added.

Still, there are several reasons to be wary of China, including weak commodity prices, reports Trang Ho for Investor’s Business Daily. She also cited China’s shadow banking system, debt-to-GDP levels, overbuilding, growing pains from urbanization, and flat-lining workforce growth.

iShares China Large-Cap

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