The largest exchange traded fund tracking China, down over 20% this year, could be rolling over again following a bounce earlier this month.

The $6 billion iShares FTSE China 25 Index Fund (NYSEArca: FXI) has pulled back over the past week after rallying close it its 50-day moving average.

The China ETF, which invests in Chinese stocks available to U.S. investors, is down 21.9% so far in 2011, according to Morningstar. Many traders watch China as a leading indicator for the health of the global economy.

“The bear has been ruthless to investors in Chinese companies,” writes Gary Gordon for The Street. “Since those Oct. 3 lows, however, several facets of the Chinese ‘story’ have become more favorable. First, analysts worldwide began upgrading China stocks on historically low valuations.” [China and the European Debt Crisis]

Chinese ETFs would also benefit from progress on the European debt logjam, he said.