Edgar Filing: CHINA FUND INC

THE CHINA FUND, INC.

ANNUAL REPORT

OCTOBER 31, 2002

THE CHINA FUND, INC.
TABLE OF CONTENTS

PAGE
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Key Highlights 1
Asset Allocation 2
Chairman's Statement 3
Investment Managers' Statements 4
About the Portfolio Managers 8
Schedule of Investments 9
Financial Statements 14
Notes to Financial Statements 18
Report of Independent Auditors 23
Other Information 24
Dividends and Distributions; 25
Dividend Reinvestment
and Cash Purchase Plan

THE CHINA FUND, INC.
KEY HIGHLIGHTS
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FUND DATA
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NYSE STOCK SYMBOL CHN
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LISTING DATE JULY 10, 1992
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SHARES OUTSTANDING 10,073,173
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TOTAL NET ASSETS (10/31/02) US$150.3 MILLION
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NET ASSET VALUE (10/31/02) $14.92
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MARKET PRICE (10/31/02) $12.61
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TOTAL RETURN
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PERFORMANCE AS OF
10/31/02: NET ASSET VALUE(1) MARKET PRICE
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12 MONTHS 14.29% 18.63%
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3-YEAR CUMULATIVE 19.54% 29.49%
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3-YEAR ANNUALIZED 6.13% 9.00%
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5-YEAR CUMULATIVE -5.20% 2.16%
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5-YEAR ANNUALIZED -1.06% 0.43%
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10-YEAR CUMULATIVE 32.42% 8.00%
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10-YEAR ANNUALIZED 2.85% 0.77%
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DIVIDEND HISTORY
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RECORD DATE INCOME CAPITAL GAINS
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12/31/01 $0.1321 --
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12/31/99 $0.1110 --
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12/31/98 $0.0780 --
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12/31/97 -- $0.5003
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12/31/96 $0.0834 --
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12/29/95 $0.0910 --
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12/30/94 $0.0093 $0.6006
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12/31/93 $0.0853 $0.8250
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12/31/92 $0.0434 $0.0116
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(1) Total investment returns reflect changes in net asset value per share during
each period and assume that dividends and capital gains distributions, if any,
were reinvested. The net asset value percentages are not an indication of the
performance of a shareholder's investment in the Fund, which is based on market
price. Total investment returns are historical and do not guarantee future
results.

THE CHINA FUND, INC.
ASSET ALLOCATION AS OF OCTOBER 31, 2002
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TEN LARGEST LISTED EQUITY INVESTMENTS*
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1. TCL International Holdings, Ltd. 6.68%
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2. Taipei Bank 5.46%
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3. Fountain Set (Holdings), Ltd. 4.59%
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4. Sohu.com Inc. 3.20%
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5. Synnex Technologies International, Corp. 3.11%
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6. Brilliance China Automotive Holdings, Ltd. 3.07%
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7. BYD Co., Ltd. 2.99%
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8. Sinopac Holdings Co. 2.72%
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9. Cheng Shin Rubber Industry Co., Ltd. 2.57%
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10. Ho Tung Chemical, Corp. 2.49%
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THREE LARGEST DIRECT INVESTMENTS*
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1. A-S China Plumbing Products, Ltd. 2.13%
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2. Captive Finance, Ltd. 2.03%
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3. Kowloon Development Co., Ltd. 1.97%
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* Percentages based on net assets at October 31, 2002.

THE CHINA FUND, INC.
CHAIRMAN'S STATEMENT
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Dear Shareholders,

I am happy to announce that the net asset value of The China Fund, Inc. grew by
14.3% in the last financial year after taking into consideration the US$0.132
per share distribution paid to shareholders in January 2002. The Fund's share
price increased by 18.6% (including the US$0.132 per share distribution) and the
Fund's discount to net asset value remained stubbornly high, being 15% at the
period's end. This would seem unreasonable given the positive performance of our
Fund. In trying to manage the NAV of our Fund, we have successfully reduced our
expenses trying to increase shareholder value. This is the new management team's
first full year in charge and they have worked hard to communicate our
investment strategy and the excellent value represented by our Fund (see the
monthly updates on our website www.chinafundinc.com). With the recent opening of
China's large, domestic "A" share market to foreign investors, and the
likelihood of appreciation of Chinese currency in the longer-term, China should
play an increasingly important role in global asset allocation decisions.
Uninspiring growth prospects in the U.S., Europe and Japan are a further reason
for international investors to increase their investments in China. Given The
China Fund, Inc.'s strong track record and low valuation, we hope investors will
regard our Fund as the most cost-effective way to participate in China's growth.

The backdrop for private equity investment in China has improved over the last
six months. China's announcement of the Qualified Foreign Institutional
Investors (QFII) scheme underlines its continuing effort for greater
liberalization and deepening of its capital markets. China remains one of the
favorite destinations of foreign direct investment funds. The Direct Investment
Manager made an investment in Captive Finance, Ltd., a Hong Kong incorporated
specialist leasing company. It has also continued its efforts to enhance and
realize value from the existing portfolio. Our Fund and other investors in New
World Sun City Limited (NWSC) signed an agreement to sell the entire share
capital of NWSC to an independent third party allowing for an accelerated exit
for the investment.

We thank you for your continuing support and for your interest in our Fund. If
you have any questions, comments or would like additional information on our
Fund's holdings, we invite you to call (toll free) 1-888-CHN-CALL (245-2255).

Sincerely,

/s/ Alan Tremain
Alan Tremain
Chairman of the Board

THE CHINA FUND, INC.
INVESTMENT MANAGERS' STATEMENTS
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REVIEW OF LISTED INVESTMENTS
The net asset value of our fund rose by 14.3% during the financial year. This
compares with a 1.9% rise in the MSCI Golden Dragon Index. Despite weak global
economic growth, China's GDP continues to grow at an annual rate of above 7%.
China's highly competitive export sector continues to win market share,
overtaking Japan as the largest exporter to the U.S. In attracting foreign
direct investment ("FDI"), China threatens to overtake the U.S. as the world's
leading recipient of FDI. Entry into the WTO at the start of the year has
enabled China's exporters to access new markets and is spurring FDI by opening
new sectors to inward investment. Growth of the domestic economy is being
sustained by public infrastructure spending and the beneficial effects of
housing reform. In politics, the 16th Communist Party Congress saw the smooth
handover of power to a younger generation of leaders, and relations across the
Taiwan Straits are the warmest they have been for several years.

Despite the encouraging macro-economic situation, your managers are well aware
that this is not yet directly reflected in the universe of listed Chinese
stocks, too many of which are weakly-managed state-owned enterprises. We
continue to concentrate the portfolio in companies where management owns a
meaningful amount of equity. This includes both companies set up by domestic
entrepreneurs, so-called "P-shares", as well as Taiwan-listed companies now
deriving the bulk of their profits from China. Although performance of our Fund
was satisfactory, our strategy suffered a set back both from the Hong Kong Stock
Exchange's ill-considered proposal to delist companies with a share price below
50 HK cents (now withdrawn) and a high profile fraud case at a Hong Kong-listed
"P-share", Euro Asia. (Our Fund did not own the share, but many sound
private-sector companies fell in sympathy). We expect these influences to fade
and for stocks to rebound from over-sold levels.

The announcement by the government at the end of the period that qualified
foreign institutional investors ("QFIIs") will be able to invest in the large,
domestic "A" share market is an important development for portfolio investors in
China. The move greatly expands our choice of companies (there are over 1,100
"A" shares) and our Fund aims to make best use of the opportunity. In a
reciprocal measure it seems likely, perhaps by the middle of 2003, that
qualified domestic investors ("QDIs") will be allowed to invest in Hong
Kong-listed companies.

Your managers are bullish on prospects for the Renminbi given the rapid build-up
in foreign exchange reserves (now almost US$260 billion) and expect it to be
amongst the world's best performing currencies over the next few years. The
portfolio is, therefore, biased towards companies benefiting from development of
the domestic economy, rather than exporters. We are less sanguine on the
prospects for the Hong Kong dollar, and our Fund is underweight in Hong Kong
property companies and banks.

THE CHINA FUND, INC.
INVESTMENT MANAGERS' STATEMENTS (CONTINUED)
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REVIEW OF DIRECT INVESTMENTS
Since our last report, there have been a number of significant political and
corporate developments that had implications for the private equity market in
China.

First, a number of recent events are leading private equity investors to
reconsider the merits of investing in PRC State Owned Enterprises ("SOEs").
These include corporate governance and transparency issues at some Hong Kong
listed private PRC companies and changes in PRC policy towards SOEs. In
addition, the call for greater protection of private property rights at the
16(th) Party Congress is encouraging in this regard. We are, therefore,
beginning to look selectively at some SOE opportunities but only when a real
change of corporate ownership occurs, management is focused on profitability and
a clear exit strategy is in place.

Second, in November, the China Securities Regulatory Commission (CSRC) and the
People's Bank of China announced provisional measures for the establishment of
the Qualified Foreign Institutional Investors (QFII) scheme. Longer term, this
should have a positive effect on the liberalization and deepening of China's
capital markets which will improve the exit market for private equity investors.
In the short term it will have limited effect on the private deal market, as it
will take time for foreigners to become comfortable and familiar with the
scheme. Until A and B share market valuations move closer together, interest in
the scheme will be limited.

Third, the Hong Kong government announced the much anticipated measures to
stabilize the Hong Kong real estate market. The key measures include the
suspension of public land auctions until the end of 2003 and the indefinite
suspension of the Home Ownership Scheme (government subsidized housing) for
2003. We are monitoring the response of the market to these measures.

Fourth, Jiang Zemin successfully orchestrated the first peaceful transfer of
power since the communist revolution. This obviously reinforces investor
confidence regarding the longer-term political stability and economic
development outlook of China.

Overall, these changes will create a more positive environment for private
equity investors. As corporate concerns over the form of political transition
ease, we expect the deal market to become more active in 2003.

During the last six months, we added one new investment to our Fund's Direct
Investments portfolio, Captive Finance, Ltd., a Hong Kong incorporated leasing
company that specializes in providing operating leases for technology equipment.
It seeks to meet the growing demand for such leasing services in Greater China
as well as in other Asian countries.

REVIEW OF DIRECT INVESTMENTS (CONTINUED)

We have also continued to work on enhancing and realizing value from the
existing portfolio investments. A number of developments are reported below in
our description of the Fund's Direct Investment portfolio as of October 31,
2002:

NEW WORLD SUN CITY LIMITED ("NWSC")
NWSC was established to develop Dongguan New World Gardens (the "Project") in
Dongguan, Guangdong Province. The Project involves development of principally
residential properties and some commercial and retail space on a 466,666 square
meter site near Dongguan. The Fund and all other investors of New World Sun City
Limited entered into a Share Transfer Agreement with independent third party
buyers on October 26, 2002 to sell the entire share capital of NWSC. This
agreement provides an accelerated exit for this investment.

A-S CHINA PLUMBING PRODUCTS LIMITED ("ASPPL")
ASPPL was established in 1994 to produce and distribute a complete line of
sanitary ware products in China. The company is a subsidiary of American
Standard Inc. ("ASI"), a U.S. based international manufacturer of plumbing
products, air conditioners, automobile and medical systems products. ASI has
granted to ASPPL the exclusive right to license trademarks owned by ASI for
plumbing products in China. The company is planning to seek a listing on the
second board (Growth Enterprise Market) of the Hong Kong Stock Exchange.

MOULIN INTERNATIONAL HOLDINGS LIMITED ("MOULIN")
Moulin is engaged in the manufacture, distribution and retailing of optical
frames. The company is listed on the Hong Kong Stock Exchange. It is one of the
largest optical frames manufacturers and distributors in the world. Customers of
Moulin are primarily authorized licensees of designer brands, leading
distributors and retail chains. In recent years, the company acquired a number
of optical frame distributors in Europe in order to increase and strengthen its
distribution business.

KOWLOON DEVELOPMENT COMPANY LIMITED ("KDCL")
KDCL engages principally in property development and investment in Hong Kong.
The company is listed on the Hong Kong Stock Exchange. Since the takeover by the
current major shareholder at the end of 2000, KDCL has been more active in the
property market in Hong Kong. More land and rental properties are acquired
through private negotiations and public bidding. The company has also taken a
more proactive approach to add value to its development projects and investment
properties.

CAPTIVE FINANCE LIMITED ("CAPTIVE")
Captive is engaged in provisioning of operating and financial lease services of
technology products (PC, servers, telecom equipment, etc.) It has operations in
Greater China, South East Asia, Europe and the U.S. Greater

REVIEW OF DIRECT INVESTMENTS (CONTINUED)

China and South East Asia are emerging, but potentially huge, markets for such
leasing services. Captive seeks to build a leading position in these countries.

Sincerely,
Chris Ruffle, Listed Investment Manager, Martin Currie Inc.
KOH Kuek Chiang, Direct Investment Manager, Asian Direct Capital Management

THE CHINA FUND, INC.
ABOUT THE PORTFOLIO MANAGERS
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LISTED INVESTMENT MANAGER
Mr. Chris Ruffle serves as the portfolio manager for the Fund's portfolio of
listed securities. Mr. Ruffle joined Martin Currie Inc. in 1994. He is a Chinese
and Taiwanese equity specialist with over 13 years investment experience in
Asia. Fluent in Mandarin and Japanese, Mr. Ruffle has worked in the Far East
since 1983. He worked originally in Beijing and Shanghai and then in Australia
for a metal trading company. He then moved to Warburg Securities in 1987 as an
analyst in Tokyo, before establishing Warburg's office in Taiwan. Mr. Ruffle
also manages The Martin Currie Hedge Fund.

DIRECT INVESTMENT MANAGER
Mr. KOH Kuek Chiang is the Executive Director of Asian Direct Capital Management
("ADCM") and is the portfolio manager of the Fund's portfolio of direct
investments. Mr. KOH joined ADCM in 1998, and has over ten years of private
equity investment experience in the U.S., Europe and Asia working for the
Government of Singapore, Union Bank of Switzerland and private interests. His
investment experience covers a wide range of industries, including
telecommunications equipment, biotechnology, media, financial services and basic
materials. Mr. KOH graduated with an engineering degree from the University of
Western Australia and has a post-graduate Diploma in Business Administration
from the National University of Singapore. He is a Chartered Financial Analyst
and is fluent in English and Mandarin.

THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2002
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NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ------ --------------

COMMON STOCK AND OTHER EQUITY INTERESTS
CHINA -- SHANGHAI "B" SHARES
CONSUMER STAPLES -- (2.1%)
Shanghai Friendship Group Co., Inc. ................... 4,143,133 $ 3,194,355
------------
INDUSTRIALS -- (0.6%)
Shanghai Matsuoka, Co. ................................ 803,550 900,780
------------
TOTAL CHINA -- SHANGHAI "B" SHARES -- (Cost
$4,762,999) 2.7% 4,095,135
------------
CHINA -- SHENZHEN "B" SHARES
INDUSTRIALS -- (1.1%)
Luthai Textile Co., Ltd. .............................. 2,599,829 1,630,029
------------
TOTAL CHINA -- SHENZHEN "B" SHARES -- (Cost
$2,024,406) 1.1% 1,630,029
------------
TOTAL CHINA -- (Cost $6,787,405) 3.8% 5,725,164
------------
HONG KONG
CONSUMER DISCRETIONARY -- (3.3%)
Brilliance China Automotive Holdings, Ltd. ............ 38,758,000 4,621,531
Leefung-Asco Printers Holdings, Ltd. .................. 3,602,000 355,612
------------
4,977,143
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CONSUMER STAPLES -- (2.8%)
Mainland Headwear Holding, Ltd. ....................... 5,000,000 1,506,536
Sino Golf Holdings, Ltd. .............................. 8,904,000 993,221
Tack Fat Group International, Ltd. .................... 30,296,000 1,747,992
------------
4,247,749
------------
HEALTH CARE -- (2.6%)
Essex Bio-Technology, Ltd.* ........................... 25,418,166 365,009
Golden Meditech Co., Ltd.*............................. 2,340,000 297,025
LifeTec Group, Ltd.*+.................................. 79,708,000 1,573,853
Natural Beauty Bio-Technology, Ltd. ................... 19,720,000 1,643,470
------------
3,879,357
------------

See notes to financial statements and notes to schedule of investments.

THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2002
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NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ------ --------------

COMMON STOCK AND OTHER EQUITY INTERESTS (CONTINUED)
HONG KONG (CONTINUED)
INDUSTRIALS -- (1.5%)
Chen Hsong Holding, Ltd. .............................. 6,630,000 $ 1,245,354
Wanyou Fire Safety Technology Holdings, Ltd.*.......... 24,715,000 998,189
------------
2,243,543
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INFORMATION TECHNOLOGY -- (9.6%)
Arcontech, Corp. ...................................... 18,386,000 565,770
Jackin International, Ltd.*............................ 16,192,000 377,845
TCL International Holdings, Ltd. ...................... 37,318,000 10,047,991
Technology Venture Holdings, Ltd.*..................... 6,528,000 178,280
TPV Technology, Ltd. .................................. 9,968,000 3,290,992
------------
14,460,878
------------
MATERIALS -- (6.0%)
China Rare Earth Holdings, Ltd. ....................... 20,284,000 2,080,583
Fountain Set (Holdings), Ltd. ......................... 14,750,000 6,902,819
------------
8,983,402
------------
TELECOMMUNICATIONS -- (0.9%)
Asia Satellite Telecommunications Holdings, Ltd. ...... 1,129,000 1,331,752
------------
UTILITIES -- (2.4%)
Geomaxima Holdings, Ltd.*.............................. 17,080,000 711,726
Wah Sang Gas Holdings, Ltd.*........................... 27,778,000 2,956,110
------------
3,667,836
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TOTAL HONG KONG -- (Cost $45,314,164) 29.1% 43,791,660
------------
HONG KONG -- "H" SHARES
CEMENT -- (1.4%)
Anhui Conch Cement Co., Ltd. .......................... 7,576,000 2,088,431
------------
ENERGY -- (3.1%)
PetroChina Co., Ltd. .................................. 5,000,000 948,371
Yanzhou Coal Mining Co. ............................... 10,286,000 3,692,718
------------
4,641,089
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INDUSTRIALS -- (3.0%)
BYD Co., Ltd.* ........................................ 2,200,000 4,499,093
------------

See notes to financial statements and notes to schedule of investments.

NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ------ --------------

COMMON STOCK AND OTHER EQUITY INTERESTS (CONTINUED)
HONG KONG -- "H" SHARES (CONTINUED)
UTILITIES -- (3.9%)
Anhui Expressway Co., Ltd. ............................ 11,998,000 $ 2,338,267
Zhejiang Expressway Co., Ltd. ......................... 10,724,000 3,471,840
------------
5,810,107
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TOTAL HONG KONG -- "H" SHARES -- (Cost $13,765,627) 11.4% 17,038,720
------------
TOTAL HONG KONG (INCLUDING "H" SHARES) -- (Cost $59,079,791)
40.5% 60,830,380
------------
SINGAPORE
CONSUMER STAPLES -- (2.0%)
Want Want Holdings, Ltd. .............................. 4,800,000 3,000,000
------------
FOODS -- (1.7%)
People's Food Holdings, Ltd. .......................... 4,400,000 2,490,308
------------
TOTAL SINGAPORE -- (Cost $6,152,041) 3.7% 5,490,308
------------
TAIWAN
CONSUMER DISCRETIONARY -- (5.5%)
Merry Electronics Co., Ltd. ........................... 1,651,400 1,808,450
Synnex Technologies International, Corp. .............. 2,892,400 4,667,850
Tainan Enterprises Co., Ltd. .......................... 1,546,000 1,799,954
------------
8,276,254
------------
CONSUMER STAPLES -- (1.0%)
Lian Hwa Foods, Corp. ................................. 3,259,000 1,465,141
------------
FINANCIALS -- (10.5%)
Polaris Securities Co., Ltd. .......................... 9,240,164 3,594,877
Sinopac Holdings Co.................................... 9,746,754 4,086,895
Taipei Bank............................................ 9,520,016 8,203,126
------------
15,884,898
------------

See notes to financial statements and notes to schedule of investments.

NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ------ --------------

COMMON STOCK AND OTHER EQUITY INTERESTS (CONTINUED)
TAIWAN (CONTINUED)
INDUSTRIALS -- (6.4%)
Cheng Shin Rubber Industry Co., Ltd. .................. 3,180,000 $ 3,858,156
Choice Lithograph, Inc. ............................... 4,512,110 1,209,297
Kaulin Manufacturing Co., Ltd. ........................ 1,600,000 1,604,611
Tong Yang Industry Co., Ltd............................ 3,620,300 2,931,713
------------
9,603,777
------------
INFORMATION TECHNOLOGY -- (5.5%)
Ability Enterprise Co., Ltd. .......................... 3,642,000 2,949,285
Advantech Co., Ltd. ................................... 1,150,920 2,189,070
Phoenixtec Power Co., Ltd. ............................ 4,569,000 3,094,279
------------
8,232,634
------------
MATERIALS -- (2.5%)
Ho Tung Chemical, Corp................................. 8,660,904 3,743,907
------------
TELECOMMUNICATIONS -- (2.0%)
Chunghwa Telecom Co., Ltd.............................. 2,146,000 2,999,452
------------
TRANSPORTATION -- (0.8%)
Eva Airways Corp....................................... 2,850,000 1,256,628
------------
METAL & MINING -- (1.1%)
China Metal Products Co., Ltd. ........................ 2,000,000 1,648,415
------------
TOTAL TAIWAN -- (Cost $42,787,091) 35.3% 53,111,106
------------
UNITED STATES -- "N" SHARES
INFORMATION TECHNOLOGY -- (6.6%)
Chinadotcom, Corp.*.................................... 1,473,654 3,535,296
SINA.com*.............................................. 574,900 1,615,469
Sohu.com Inc.*......................................... 1,520,386 4,805,028
------------
TOTAL UNITED STATES -- "N" SHARES --
(Cost $8,608,553) 6.6% 9,955,793
------------
TOTAL COMMON STOCK AND OTHER EQUITY
INTERESTS -- (Cost $123,414,881) 89.9% 135,112,751
------------

See notes to financial statements and notes to schedule of investments.

NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ------ --------------

DIRECT INVESTMENTS
FINANCIALS -- (2.0%)
Captive Finance, Ltd.(acquired 5/24/02)(1)*+........... 2,000,000 $ 3,045,000
------------
REAL ESTATE -- (2.2%)
Kowloon Development Co., Ltd. (acquired 3/1/02)(1)..... 6,520,000 2,967,683
New World Sun City, Ltd. (acquired 12/12/92)(1)+....... 83 299,908
------------
3,267,591
------------
SANITARY WARE -- (2.1%)
A-S China Plumbing Products, Ltd. (acquired
4/14/94)(1)*......................................... 450 3,200,000
------------

PRINCIPAL
---------

MANUFACTURING, DISTRIBUTION AND RETAIL -- (1.3%)
Moulin International Holding, Ltd., convertible bond at
5.0% (acquired 8/17/99)(1)........................... $2,000,000 2,003,922
------------
TOTAL DIRECT INVESTMENTS -- (Cost $12,519,998) 7.6% 11,516,513
----- ------------
TOTAL INVESTMENTS -- (Cost $135,934,879) (Note E) 97.5% 146,629,264
----- ------------
OTHER ASSETS AND LIABILITIES 2.5% 3,690,121
----- ------------
NET ASSETS 100.0% $150,319,385
===== ============

Notes to Schedule of Investments

* Denotes non-income producing security

+ Affiliated issuer (Note G)

(1) Direct investments are generally restricted as to resale and do not have a
readily available resale market. On the date of acquisition of each direct
investment, there were no market quotations on similar securities, and such
investments were therefore initially valued at acquisition cost. These
direct investments are valued at fair value as determined by the Board of
Directors as discussed in Notes A and B to the Financial Statements.

See notes to financial statements and notes to schedule of investments.

THE CHINA FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2002
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--------------------------------------------------------------------------------

ASSETS
Investments in listed investments, at value (cost
$123,414,881) (Note A)................................. $135,112,751
Investments in direct investments, at value (cost
$12,519,998) (Notes A and B)........................... 11,516,513
Cash...................................................... 276,806
Foreign currency, at value (cost $3,249,388).............. 3,252,744
Receivable for investments sold........................... 1,402,877
Dividends and interest receivable......................... 426,003
Other assets.............................................. 100,418
------------
TOTAL ASSETS................................................ 152,088,112
------------
LIABILITIES
Payable for investments purchased......................... 1,425,377
Investment management fee payable (Note C)................ 117,422
Administration, custodian and transfer agent fees
payable................................................ 69,962
Accrued expenses and other liabilities.................... 155,966
------------
TOTAL LIABILITIES........................................... 1,768,727
------------
TOTAL NET ASSETS............................................ $150,319,385
============
COMPOSITION OF NET ASSETS:
Common stock, at par value (Note D)....................... $ 100,732
Capital paid in excess of par (Note D).................... 139,058,478
Accumulated undistributed net investment income........... 644,376
Accumulated net realized gains (losses) on investments and
foreign currency transactions.......................... (182,243)
Net unrealized appreciation on investments and foreign
currency transactions.................................. 10,698,042
------------
TOTAL NET ASSETS............................................ $150,319,385
============
NET ASSETS VALUE PER SHARE
($150,319,385 /10,073,173 shares of common stock
outstanding)........................................... $14.92
------
------

See notes to financial statements and notes to schedule of investments.

THE CHINA FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 2002
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INVESTMENT INCOME
Dividend income -- listed investments (net of foreign tax
withholding $374,094).................................. $ 4,058,083
Dividend income -- direct investments..................... 17,674
Interest income -- direct investments (net of foreign tax
withholding $622)...................................... 147,328
-----------
TOTAL INVESTMENT INCOME................................ 4,223,085
-----------
EXPENSES
Investment management fees (Note C)....................... 1,322,490
Custodian fees............................................ 475,292
Directors' fees and expenses (Note C)..................... 341,157
Administration fees....................................... 259,815
Legal fees................................................ 216,932
Stock dividend tax expense (Note A)....................... 188,734
Insurance................................................. 86,716
Printing and postage...................................... 59,571
Audit and tax service fees................................ 56,749
Miscellaneous expenses.................................... 38,356
Transfer agent fees....................................... 24,131
Shareholder services fees................................. 20,979
-----------
TOTAL EXPENSES......................................... 3,090,922
-----------
NET INVESTMENT INCOME....................................... 1,132,163
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY
Net realized gain on listed investment transactions....... 1,073,056
Net realized loss on direct investment transactions....... (8,010,544)
Net realized loss on foreign currency transactions........ (487,786)
-----------
(7,425,274)
-----------
Net change in unrealized appreciation on listed
investments and foreign currency transactions.......... 18,021,762
Net change in unrealized depreciation on direct
investments............................................ 7,009,330
-----------
25,031,092
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS..................................... 17,605,818
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $18,737,981
===========

See notes to financial statements and notes to schedule of investments.

THE CHINA FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

YEAR ENDED YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
---------------- ----------------

INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income..................................... $ 1,132,163 $ 1,409,470
Net realized gain/(loss) on investments and foreign
currency transactions.................................. (7,425,274) 5,115,719
Net change in unrealized appreciation on investments and
foreign currency transactions.......................... 25,031,092 1,766,976
------------ ------------
Net increase in net assets from operations................ 18,737,981 8,292,165
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................... (1,330,135) --
------------ ------------
Total dividends and distributions to shareholders......... (1,330,135) --
------------ ------------
NET INCREASE IN NET ASSETS.................................. 17,407,846 8,292,165
------------ ------------
NET ASSETS:
Beginning of year........................................... 132,911,539 124,619,374
------------ ------------
End of year, including undistributed net investment income
of $644,376 and $1,330,135, respectively.................. $150,319,385 $132,911,539
============ ============

See notes to financial statements and notes to schedule of investments.

THE CHINA FUND, INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING FOR THE YEARS INDICATED
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

2002 2001 2000 1999 1998
-------- -------- -------- -------- --------

PER SHARE DATA(1)
Net asset value, beginning of year.......... $ 13.19 $ 12.37 $ 12.74 $ 10.84 $ 16.97
Net investment income (loss)................ 0.11 0.14 (0.03) 0.12 0.08(2)
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions.............................. 1.75 0.68 (0.23) 1.86 (5.71)
-------- -------- -------- -------- --------
Total income (loss) from investment
operations................................ 1.86 0.82 (0.26) 1.98 (5.63)
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income...... (0.13) 0.00 (0.11) (0.08) 0.00
Distributions from net realized capital
gains................................... 0.00 0.00 0.00 0.00 (0.50)
-------- -------- -------- -------- --------
Total distributions......................... (0.13) 0.00 (0.11) (0.08) (0.50)
-------- -------- -------- -------- --------
Net asset value, end of year................ $ 14.92 $ 13.19 $ 12.37 $ 12.74 $ 10.84
======== ======== ======== ======== ========
Per share market value, end of year......... $ 12.61 $ 10.74 $ 8.94 $ 9.94 $ 8.75
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN (BASED ON MARKET
VALUE).................................... 18.63% 20.13% (9.14)% 14.65% (31.98)%
======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year (000's)............. $150,319 $132,912 $124,619 $128,303 $116,891
Ratio of expenses to average net assets..... 1.97% 2.39% 2.12% 2.28% 2.22%(2)
Ratio of expense to average net assets,
excluding stock dividend tax expense...... 1.85% 2.31% 2.12% 2.28% 2.22%
Ratio of net investment income (loss) to
average net assets........................ 0.72% 1.09% (0.21)% 0.95% 0.68%
Portfolio turnover rate..................... 68% 115% 108% 75% 24%

(1) Based on average shares outstanding during the period.
(2) The ratios of expenses to average net assets and the net investment income
(loss) per share is after the waiver of a portion of the fee by HSBC
Management. Had HSBC Management not waived these fees, the ratio of expenses
to average net assets and the net investment income per share would have
been as follows: For the year ended October 31, 1998, 2.33% and $0.07,
respectively.

See notes to financial statements and notes to schedule of investments.

THE CHINA FUND, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The China Fund, Inc. (the "Fund") was incorporated under the laws of the State
of Maryland on April 28, 1992, and is a non-diversified, closed-end management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's investment objective is long-term capital appreciation
through investments in the equity securities of companies engaged in a
substantial amount of business in the People's Republic of China. The following
is a summary of significant accounting policies followed by the Fund in the
preparation of its financial statements.

USE OF ESTIMATES: The preparation of financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses for the period. Actual results could differ from these
estimates. The significant estimates made as of, and for the year ended, October
31, 2002 relate to the valuation of the Fund's Direct Investments, as further
discussed below and in Note B.

SECURITY VALUATION: Portfolio securities listed on recognized United States or
foreign securities exchanges are valued at the last quoted sales price in the
principal market where they are traded. Listed securities with no such sales
price and unlisted securities are valued at the mean between the current bid and
asked prices, if any, of two brokers. Short-term investments having maturities
of sixty days or less are valued at amortized cost (original purchase cost as
adjusted for amortization of premium or accretion of discount) which when
combined with accrued interest approximates market value. Securities for which
market quotations are readily available are valued at current market value.
Securities for which market quotations are not readily available are valued in
good faith at fair value using methods determined by the Board of Directors.
Direct Investments not traded on an exchange are valued at fair value as
determined by the Board of Directors based on advice from the Investment Manager
and Direct Investment Manager. The Direct Investment's original cost is
considered to be fair value unless the Board of Directors, based on such advice,
concludes there has been a material change of a long-term nature and sufficient
reliable information is available to revalue these investments.

FOREIGN CURRENCY TRANSLATIONS: The records of the Fund are maintained in U.S.
dollars. Foreign currencies, investments and other assets and liabilities are
translated into U.S. dollars at the current exchange rates. Purchases and sales
of investment securities and income and expenses are translated on the
respective dates of such transactions. Net realized gains and losses on foreign
currency transactions represent net gains and losses from the disposition of
foreign currencies, currency gains and losses realized between the trade dates
and settlement dates of security transactions, and the difference between the
amount of net investment income accrued and the U.S. dollar amount actually
received. The effects of changes in foreign currency exchange rates on
investments in securities are not segregated in the Statement of Operations from
the effects of changes in market prices of those securities, but are included in
realized and unrealized gain or loss on investments.

OPTIONS CONTRACTS: The Fund may purchase and write (sell) call options and put
options provided the transactions are for hedging purposes and the initial
margin and premiums do not exceed 5% of total assets.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Option contracts are valued daily and unrealized gains or losses are recorded
based upon the last sales price on the principal exchange on which the options
are traded. The Fund will realize a gain or loss upon the expiration or closing
of the option contract. When an option is exercised, the proceeds on sales of
the underlying security for a written call option, the purchase cost of the
underlying security for a written put option, or the cost of the underlying
security for a purchased put or call option is adjusted by the amount of premium
received or paid.

The risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
in buying an option is that the Fund pays a premium whether or not the option is
exercised. Risks may also arise from an illiquid secondary market or from the
inability of counterparties to meet the terms of the contract.

SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are recorded
as of the trade date. Realized gains and losses from securities sold are
recorded on the identified cost basis. Dividend income is recorded on the
ex-dividend date, or, in the case of dividend income on foreign securities, on
the ex-dividend date or when the Fund becomes aware of its declaration. Interest
income is recorded on the accrual basis. All premiums and discounts are
amortized/accreted using the yield-to-maturity method for both financial
reporting and federal income tax purposes.

Dividend and interest income generated in Taiwan is subject to a 20% withholding
tax. Stock dividends received (except those which have resulted from
capitalization of capital surplus) are taxable at 20% of the par value of the
stock dividends received. The Fund records the taxes paid on stock dividends as
an operating expense.

DIVIDENDS AND DISTRIBUTIONS: The Fund intends to distribute to its
shareholders, at least annually, substantially all of its net investment income
and any net realized capital gains. Income and capital gains distributions are
determined in accordance with income tax regulations, which may differ from
generally accepted accounting principles. These differences are primarily due to
differing treatments of foreign currency transactions, losses deferred due to
wash sales and holdings in passive foreign investment companies.

The Fund paid $1,330,135 from Ordinary Income during the year ended October 31,
2002. As of October 31, 2002 the components of distributable earnings on a tax
basis were $2,152,414 for Undistributed Ordinary Income, $6,910 for
Undistributed Long-Term Capital Gain, $8,997,192 for Unrealized Appreciation and
$0 for accumulated capital and other losses.

FEDERAL INCOME TAXES: The Fund has qualified and intends to qualify in the
future as a regulated investment company by complying with the provisions of the
Internal Revenue Code available to certain investment companies, including
making distributions of taxable income and capital gains sufficient to relieve
it from all, or substantially all, federal income and excise taxes.

NOTE B -- VALUATION OF DIRECT INVESTMENTS
At October 31, 2002, Direct Investments amounting to $8,548,830 (5.7% of net
assets) have been valued at fair value as determined by the Board of Directors
in the absence of readily ascertainable market values. The remaining Direct
Investments are being valued at readily available market prices (See Note
A -- Security

Valuation). The procedures applied by the Board of Directors in arriving at its
estimate of value of securities without readily available market values comply
with the Fund's policies for valuing Direct Investments at original cost unless
the Board of Directors, based on advice from the Investment Manager and Direct
Investment Manager, concludes that there has been a material change of a
long-term nature and sufficient reliable information is available to revalue
these investments. Determination of fair values involves subjective judgment
and, because of the inherent uncertainty of valuation, the Board of Directors'
estimated values may differ significantly from the values that would have been
used had a ready market for the securities existed, and the differences could be
material.

NOTE C -- ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Effective June 30, 2001, Martin Currie Inc. assumed its role as manager of the
Fund's listed assets (the "Listed Assets") and is paid a fee, computed weekly
and payable monthly, at the following annual rates: 1.00% of the first US$25
million of the Fund's average weekly net assets invested in Listed Assets; 0.90%
of the next US$25 million of the Fund's average weekly net assets invested in
Listed Assets; 0.70% of the next US$25 million of the Fund's average weekly net
assets invested in Listed Assets; and 0.50% of the Fund's average weekly net
assets invested in Listed Assets in excess of US$75 million. Prior to June 30,
2001, HSBC Management served as the Investment Manager for the Fund's Listed
Assets and was paid an annual fee at the rate of 1.10% of the Fund's average
weekly net assets.

On June 15, 2001, the Fund's stockholders approved from Asian Direct Capital
Management ("ADCM") as the new investment manager for the Fund's assets
allocated to direct investments. For the period from June 15, 2001 to June 30,
2001, ADCM received a fee for its services under the New Direct Investment
Management Agreement, computed weekly and payable monthly at an annual rate
equal to 1.10% of the average weekly value of the assets of the Fund invested in
direct investments. Effective June 30, 2001, ADCM receives a fee, computed
weekly and payable monthly at an annual rate equal to the greater of $300,000 or
2.2% of the average weekly value of the net assets of the Fund invested in
direct investments. Prior to June 15, 2001, HSBC Private Equity served as the
manager of the Fund's assets allocated to direct investments. HSBC Private
Equity was paid a fee by HSBC Management out of its fee.

No director, officer or employee of the Investment Manager or Direct Investment
Manager or any affiliates of those entities will receive any compensation from
the Fund for serving as an officer or director of the Fund. The Fund pays the
Chairman of the Board and each of the directors (who is not a director, officer
or employee of the Investment Manager or Direct Investment Manager or any
affiliate thereof) an annual fee of $27,500 and $10,000, respectively, plus
$2,000 for each Board of Directors' meeting or Audit Committee meeting attended.
In addition, the Fund will reimburse each of the directors for travel and
out-of-pocket expenses incurred in connection with attending Board of Directors'
meetings.

NOTE D -- CAPITAL STOCK
The Board of Directors of the Fund has approved a share repurchase plan. Under
the program, the Fund will repurchase shares at management's discretion at times
when it considers the repurchase to be consistent with the objectives of the
program. For the year ended October 31, 2002, the Fund did not participate in
this program.

NOTE E -- INVESTMENT TRANSACTIONS
For the year ended October 31, 2002, the Fund's cost of purchases and proceeds
from sales of investment securities, other than short-term securities, were
$105,879,924 and $102,718,076, respectively. At October 31, 2002, the cost of
investments for federal income tax purposes was $137,632,072. Gross unrealized
appreciation of investments was $26,418,018, while gross unrealized depreciation
of investments was $17,420,826, resulting in net unrealized appreciation of
investments of $8,997,192.

NOTE F -- INVESTMENTS IN CHINA
The Fund's investments in China companies involve certain risks not typically
associated with investments in securities of U.S. companies or the U.S.
Government, including risks relating to (1) social, economic and political
uncertainty; (2) price volatility, lesser liquidity and smaller market
capitalization of securities markets in which securities of China companies
trade; (3) currency exchange fluctuations, currency blockage and higher rates of
inflation; (4) controls on foreign investment and limitations on repatriation of
invested capital and on the Fund's ability to exchange local currencies for U.S.
dollars; (5) governmental involvement in and control over the economy; (6) risk
of nationalization or expropriation of assets; (7) the nature of the smaller,
less seasoned and newly organized China companies, particularly in China; and
(8) the absence of uniform accounting, auditing and financial reporting
standards, practices and disclosure requirements and less government supervision
and regulation.

NOTE G -- INVESTMENTS IN NON-CONTROLLED AFFILIATES*:

DIVIDENDS INTEREST
INCLUDED IN INCLUDED IN
DIVIDEND INTEREST
BALANCE OF GROSS BALANCE OF INCOME- INCOME-
SHARES HELD PURCHASES GROSS SHARES HELD VALUE ON NON- NON-
OCTOBER 31, AND SALES AND OCTOBER 31, OCTOBER 31, CONTROLLED CONTROLLED PRINCIPAL
NAME OF ISSUER 2001 ADDITIONS REDUCTIONS 2002 2002 AFFILIATES AFFILIATES PAYMENTS
-------------- ----------- ---------- ---------- ----------- ----------- ----------- ----------- -----------

Captive Finance,
Ltd. ................ -- 2,000,000 -- 2,000,000 $3,045,000 $-- $ -- $ --
LifeTec Group, Ltd. ... 59,846,000 19,862,000 79,708,000 1,573,853 -- --
New World Sun City,
Ltd. ................ 83 -- -- 83 299,908 -- 21,929 309,709

* Affiliated issuers, as defined in the 1940 Act, include issuers in which the
Fund held 5% or more of the outstanding voting securities.

NOTE H -- BENEFICIAL INTEREST

As of October 31, 2002, the Fund had 2 investor shareholders owning beneficially
or of record 24.92% shares of the Fund.

THE CHINA FUND, INC.
REPORT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The Stockholders and Board of Directors
The China Fund, Inc.:

We have audited the accompanying statement of assets and liabilities of The
China Fund, Inc., including the schedule of investments, as of October 31, 2002,
and the related statement of operations for the year then ended, the statements
of changes in net assets for each of the years in the two-year period then ended
and financial highlights for each of the years in the five-year period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2002, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
China Fund, Inc. as of October 31, 2002, the results of its operations for the
year then ended, changes in its net assets for each of the years in the two-year
period then ended and financial highlights for each of the years in the
five-year period then ended, in conformity with accounting principles generally
accepted in the United States of America.

KPMG LLP

Boston Massachusetts
December 4, 2002

THE CHINA FUND, INC.
OTHER INFORMATION
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

PRIVACY NOTICE

The China Fund, Inc. collects nonpublic personal information about its
shareholders from the following sources:

[ ] Information it receives from shareholders on applications or other
forms; and

[ ] Information about shareholder transactions with the Fund.

THE FUND'S POLICY IS TO NOT DISCLOSE NONPUBLIC PERSONAL INFORMATION ABOUT ITS
SHAREHOLDERS TO NONAFFILIATED THIRD PARTIES (other than disclosures permitted by
law).

The Fund restricts access to nonpublic personal information about its
shareholders to those agents of the Fund who needs to know that information to
provide products or services to shareholders. The Fund maintains physical,
electronic and procedural safeguards that comply with federal standards to guard
its shareholders' nonpublic personal information.

--------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS;
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

The Fund will distribute to shareholders, at least annually, substantially all
of its net investment income from dividends and interest earnings and expects to
distribute any net realized capital gains annually. Pursuant to the Dividend
Reinvestment and Cash Purchase Plan (the "Plan"), adopted by the Fund, each
shareholder will be deemed to have elected, unless State Street Bank and Trust
Company, the Plan Agent, is otherwise instructed by the stockholder in writing,
to have all distributions automatically reinvested by the Plan Agent in Fund
shares pursuant to the Plan. Shareholders who do not participate in the Plan
will receive all distributions in cash paid by check in U.S. dollars mailed
directly to the stockholder by State Street Bank and Trust Company, as paying
agent. Shareholders who do not wish to have distributions automatically
reinvested should notify the Fund, c/o Plan Agent for The China Fund, Inc. at
P.O. Box 8200, Boston, Massachusetts 02266-8200.

The Plan Agent will serve as agent for the shareholders in administering the
Plan. If the Directors of the Fund declare an income dividend or a capital gains
distribution payable either in the Fund's Common Stock or in cash, as
shareholders may have elected, non-participants in the Plan will receive cash
and participants in the Plan will receive Common Stock, to be issued by the
Fund. If the market price per share on the valuation date equals or exceeds net
asset value per share on that date, the Fund will issue new shares to
participants at net asset value or, if the net asset value is less than 95% of
the market price on the valuation date, then at 95% of the market price. The
valuation date will be the dividend or distribution payment date or, if that
date is not a trading day on the exchange on which the Fund's shares are then
listed, the next preceding trading day. If net asset value exceeds the market
price of Fund shares at such time, participants in the Plan will be deemed to
have elected to receive shares of stock from the Fund, valued at market price on
the valuation date. If the Fund should declare a dividend or capital gains
distribution payable only in cash, the Plan Agent will, as agent for the
participants, buy Fund shares in the open market, on the New York Stock Exchange
or elsewhere, with the cash in respect of such dividend or distribution, for the
participant's account on, or shortly after, the payment date.

Participants in the Plan have the option of making additional payments to the
Plan Agent, annually, in any amount from $100 to $3,000 for investment in the
Fund's Common Stock. The Plan Agent will use all funds received from
participants (as well as any dividends and capital gains distributions received
in cash) to purchase Fund shares in the open market on or about January 15 of
each year. Any voluntary cash payments received more than thirty days prior to
such date will be returned by the Plan Agent, and interest will not be paid on
any uninvested cash payments. To avoid unnecessary cash accumulations, and also
to allow ample time for receipt and processing by the Plan Agent, it is
suggested that participants send in voluntary cash payments to be received by
the Plan Agent approximately ten days before January 15. A participant may
withdraw a voluntary cash payment by written notice, if the notice is received
by the Plan Agent not less than 48 hours before such payment is to be invested.

The Plan Agent maintains all stockholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in non-certificated form in
the name of the participant, and each stockholder's proxy will include those
shares purchased pursuant to the Plan.

DIVIDENDS AND DISTRIBUTIONS;
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

In the case of shareholders, such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
stockholder as representing the total amount registered in the stockholder's
name and held for the account of beneficial owners who are participating in the
Plan.

There is no charge to participants for reinvesting dividends or capital gains
distributions. The Plan Agent's fees for the handling of the reinvestment of
dividends and distributions will be paid by the Fund. However, each
participant's account will be charged a pro rata share of brokerage commissions
incurred with respect to the Plan Agent's open market purchases in connection
with the reinvestment of dividends or capital gains distributions. A participant
will also pay brokerage commissions incurred in purchases from voluntary cash
payments made by the participant. Brokerage charges for purchasing small amounts
of stock for individual accounts through the Plan are expected to be less than
the usual brokerage charges for such transactions, because the Plan Agent will
be purchasing stock for all participants in blocks and prorating the lower
commission thus attainable.

The automatic reinvestment of dividends and distributions will not relieve
participants of any income tax which may be payable on such dividends and
distributions.

Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payment made and any dividend or distribution paid subsequent to
notice of the change sent to all shareholders at least 90 days before the record
date for such dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent by at least 90 days' written notice to all
shareholders. All correspondence concerning the Plan should be directed to the
Plan Agent for The China Fund, Inc. at P.O. Box 8200, Boston, Massachusetts
02266-8200.

THE CHINA FUND, INC.
DIRECTORS AND OFFICERS (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The following table sets forth information concerning directors and officers of
the Fund.

PRINCIPAL OCCUPATION OR EMPLOYMENT DURING
NAME (AGE) AND PRESENT OFFICE PAST FIVE YEARS AND DIRECTORSHIPS IN DIRECTOR
ADDRESS OF DIRECTOR WITH THE FUND PUBLICLY HELD COMPANIES SINCE
------------------- ------------------ ----------------------------------------- --------

Alan Tremain (67) Chairman of the Chairman of the Board of the Fund; 1992
380 South Country Road Board and Director Chairman, Hotels of Distinction
Suite 200 Ventures, Inc. (1989-present);
Palm Beach, Florida 33480 Chairman, Hotels of Distinction
(International), Inc. (1974-present).
Kathleen Cuocolo (51)(1) President and Executive Vice President, State Street 2001
225 Franklin Street Director Bank and Trust Company (1982- present);
Boston, MA 02111 Chairman of the Board of Directors for
Select Sector SPDRs Series Trust and
Treasurer of the streetTRACKS Series
Trust.
Sir Alan Donald (71) Director British Ambassador to the People's 1992
Applebys Republic of China (1988-1991);
Chiddingstone Causeway Director, HSBC China Fund Limited;
Kent, TN11 8JH Director, Fleming Asian Investment
United Kingdom Trust (1997-2001); Director, Fleming
Far Eastern Investment Trust (1991-
1997); Adviser, Rolls Royce plc. (1991-
2000).
Michael F. Holland (58) Director Chairman, Holland & Company L.L.C. 1992
375 Park Avenue (1995-present); Director, The Holland
New York, New York 10152 Balanced Fund, Inc., State Street
Master Funds and State Street
Institutional Investment Trust.
Burton Levin (72) Director Visiting Professor Carleton College 1992
18 Page Farm Road (1995- present); Co-Chairman, Hopkins-
Sherborn, MA 01770 Nanjing Center (1999-present);
Director, Noble Ltd. (1997-present);
U.S. Ambassador to Burma (1987-1990).
James J. Lightburn (59) Director Attorney, member of Hughes Hubbard & Reed 1992
47, Avenue Georges Mandel (1993-present).
Paris, France 75116

THE CHINA FUND, INC.
DIRECTORS AND OFFICERS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Joe O. Rogers (54) Director The Rogers Team LLC, organizing member 1992
2247 Foxwood Drive (July 2001-present); Executive Vice
Chapel Hill, NC 27514 President of Business Development,
PlanetPortal.com, Inc. (Sept. 1999-May
2001); President, Rogers International,
Inc. (1986-1998); Vice President of
Business Development, Thomson
Consulting (1998-May 1999); Director,
The Taiwan Fund, Inc. (1986-present).

Nigel S. Tulloch (56) Director Chief Executive, HSBC Asset Management 1992
7, Circe Circle Bahamas Limited (1986- 1992); Director,
Dalkeith The HSBC China Fund Limited.
WA6009
Australia

Ann M. Casey (36) Treasurer Vice President, State Street Bank and
225 Franklin Street Trust Company.
Boston, MA 02111

Mary Moran Zeven (41) Secretary Senior Vice President and Senior Counsel,
225 Franklin Street State Street Bank and Trust Company.
Boston, MA 02111

Julie A. Tedesco (45) Assistant Vice President & Counsel, State Street
225 Franklin Street Secretary Bank and Trust Company.
Boston, MA 02111

Leonard B. Mackey, Jr. (51) Assistant Partner, Clifford Chance Rogers & Wells
200 Park Avenue Secretary LLP.
New York, New York
10166-0153

(1) Director is considered to be an "interested person" (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act")) of the Fund or of
the Fund's investment adviser. Ms. Cuocolo is deemed to be an interested person
because of her affiliation with State Street Bank and Trust Company, the parent
company of Asian Direct Capital Management, the Fund's direct investment
manager. State Street Bank and Trust Company is the Fund's administrator.

THE CHINA FUND, INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

UNITED STATES ADDRESS
The China Fund, Inc.
225 Franklin Street
Boston, MA 02111
1-888-CHN-CALL (246-2255)

DIRECTORS AND OFFICERS
Alan Tremain, O.B.E., Director and Chairman of the Board
Kathleen C. Cuocolo, Director and President
Sir Alan Donald KCMG, Director
Michael F. Holland, Director
Burton Levin, Director
James J. Lightburn, Director
Joe O. Rogers, Director
Nigel S. Tulloch, Director
Ann M. Casey, Treasurer
Mary Moran Zeven, Secretary
Julie A. Tedesco, Assistant Secretary
Leonard B. Mackey, Jr., Assistant Secretary

INVESTMENT MANAGER
Martin Currie Inc.

DIRECT INVESTMENT MANAGER
Asian Direct Capital Management

SHAREHOLDER SERVICING AGENT
Georgeson Shareholder

ADMINISTRATOR, CUSTODIAN, TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
State Street Bank and Trust Company

INDEPENDENT AUDITORS
KPMG LLP

LEGAL COUNSEL
Clifford Chance Rogers & Wells LLP