China's PPI rises for first time since 2022, but China ETFs remain cautious amid weak demand.

China's Producer Price Index (PPI) increased 0.5% year-over-year in March 2026, marking the first rise since September 2022, driven mainly by higher oil prices amid Middle East tensions. This signals a potential industrial sector turnaround after years of margin pressure. However, the inflation is cost-push rather than demand-driven, raising concerns about sustainable profit growth. China-focused ETFs like iShares MSCI China ETF (MCHI) and iShares China Large-Cap ETF (FXI) have not rallied, trading at discounted valuations due to ongoing weak domestic demand, property sector stress, and geopolitical risks. Investors remain cautious, awaiting clearer signs of a durable, demand-led recovery before revaluing these ETFs.