It's a legal no no but stigma is fading very very quickly because a lot of young women who otherwise want children just can't handle the pain and damage to both their bodies and careers. Some have spent their youths chasing careers and now in their late 30's to early/mid 40's, they find that their bodies can no longer do it... however, their bank accounts can! Some are even seeing it as a status symbol since rich people go abroad and pay massive sums to do it.
The ethical issue is not with surrogacy itself but with what might be done by unethical groups if surrogacy were allowed. There is concern that they may coerce poor rural women into doing it while keeping the lion's share of the profits with the handlers which is basically not too far from a human trafficking concern. But if well-regulated to ensure that the surrogate mothers are properly paid and give informed consent, there is nothing unethical and it could be a significant boon to China's birth rate. That's why there is a push in the CCP to find a way to achieve this and legalize surrogacy.