UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number: -811-05749
THE CHINA FUND, INC.
(Exact name of registrant as specified in charter)
c/o STATE STREET BANK AND TRUST COMPANY
2 AVENUE DE LAFAYETTE
P.O. BOX 5049
BOSTON, MA 02206-5049
(Address of principal executive offices)(Zip code)
(Name and Address of Agent for Copy to:
Service)
Mary Moran Zeven Leonard B. Mackey, Jr., Esq.
Secretary Clifford Chance U.S. LLP
The China Fund, Inc. 31 West 52nd Street
2 Avenue de Lafayette New York, New York 10019
Boston, MA 02111
Registrant's telephone number, including area code: (888) 246-2255
Date of fiscal year end: October 31
Date of reporting period: July 31, 2008
ITEM 1. SCHEDULE OF INVESTMENTS.
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS
JULY 31, 2008 (UNAUDITED)
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ---------- --------------
COMMON STOCK AND OTHER EQUITY INTERESTS
CHINA
FINANCIALS -- (0.4%)
Shanghai Lujiazui Finance & Trade Zone Development Co., Ltd. 1,667,458 $ 2,291,087
------------
TOTAL CHINA -- (Cost $3,976,899) 0.4% 2,291,087
------------
HONG KONG
CONSUMER DISCRETIONARY -- (6.5%)
Anta Sports Products, Ltd. 6,734,000 5,282,144
China Travel International Investment Hong Kong, Ltd. 10,982,000 2,969,953
Huabao International Holdings, Ltd. 9,135,000 7,352,819
Intime Department Store Group Co., Ltd.# 8,778,000 4,815,319
Ports Design, Ltd. 2,678,500 7,243,689
Shangri-La Asia, Ltd. 4,141,555 8,907,198
Yorkey Optical International Cayman, Ltd.# 16,424,000 3,283,895
------------
39,855,017
------------
CONSUMER STAPLES -- (5.1%)
Chaoda Modern Agriculture (Holdings), Ltd.(1) 20,633,998 23,934,131
China Huiyuan Juice Group, Ltd.(1)# 13,000,500 7,731,500
------------
31,665,631
------------
ENERGY -- (1.6%)
China Rare Earth Holdings, Ltd. # 15,254,000 2,893,551
Fushan International Energy Group, Ltd.* 3,840,000 2,706,946
Honghua Group, Ltd.* 11,172,000 4,152,548
------------
9,753,045
------------
FINANCIALS -- (1.6%)
SPG Land (Holdings), Ltd.(1)# 11,037,000 4,951,135
Tianjin Development Holdings, Ltd. 8,440,000 5,192,415
------------
10,143,550
------------
HEALTH CARE -- (4.2%)
China Shineway Pharmaceutical Group, Ltd.# 11,184,000 8,170,671
Golden Meditech Co., Ltd.(1)# 35,040,000 11,227,674
Natural Beauty Bio-Technology, Ltd.# 32,780,000 6,596,208
------------
25,994,553
------------
INDUSTRIALS -- (1.1%)
TPV Technology, Ltd. 12,728,000 6,541,694
------------
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2008 (UNAUDITED)
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ---------- --------------
COMMON STOCK AND OTHER EQUITY INTERESTS (CONTINUED)
HONG KONG (CONTINUED)
INFORMATION TECHNOLOGY -- (0.4%)
Arcontech Corp.(2)*# 18,386,000 $ --
Chinasoft International, Ltd.# 19,230,000 2,661,882
------------
2,661,882
------------
MATERIALS -- (0.1%)
Ocean Grand Chemicals Holdings, Ltd.(2)*# 17,379,000 690,514
------------
UTILITIES -- (2.5%)
Xinao Gas Holdings, Ltd.(1)# 9,286,000 15,591,420
------------
TOTAL HONG KONG -- (Cost $102,492,370) 23.1% 142,897,306
------------
HONG KONG - "H" SHARES
CONSUMER STAPLES -- (2.3%)
Wumart Stores, Inc.# 15,126,000 14,540,223
------------
ENERGY -- (2.6%)
China Oilfield Services, Ltd.(1) 7,132,000 10,676,770
China Shenhua Energy Co., Ltd.(1) 1,450,000 5,426,709
------------
16,103,479
------------
HEALTH CARE -- (2.0%)
Shandong Weigao Group Medical Polymer Co., Ltd.# 9,004,000 12,140,510
------------
INDUSTRIALS -- (0.0%)
China Railway Group, Ltd.(1)* 504 413
------------
MATERIALS -- (1.3%)
Zijin Mining Group Co., Ltd.(1) 10,408,000 8,270,746
------------
TELECOMMUNICATIONS -- (1.6%)
ZTE Corp. (1) 1,980,360 9,848,307
------------
TOTAL HONG KONG - "H" SHARES -- (Cost $46,575,325) 9.8% 60,903,678
TOTAL HONG KONG (INCLUDING "H" SHARES) --
(Cost $149,067,695) ------------
32.9% 203,800,984
------------
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ---------- --------------
COMMON STOCK AND OTHER EQUITY INTERESTS (CONTINUED)
SINGAPORE
CONSUMER STAPLES -- (2.3%)
China Fishery Group, Ltd.# 7,870,000 $ 7,481,262
Hsu Fu Chi International, Ltd.# 8,409,000 6,640,869
------------
14,122,131
------------
INFORMATION TECHNOLOGY -- (0.5%)
CDW Holding, Ltd.(2)#+ 60,000,000 3,290,556
------------
TOTAL SINGAPORE -- (Cost $17,627,699) 2.8% 17,412,687
------------
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2008 (UNAUDITED)
TAIWAN
CONSUMER DISCRETIONARY -- (7.3%)
FamilyMart Co., Ltd.# 3,777,652 6,388,377
Far Eastern Department Stores, Ltd. 18,511,584 16,317,220
HannStar Display Corp. 17,900,000 5,411,315
Merry Electronics Co., Ltd. 3,584,340 5,569,997
Synnex Technology International Corp. 5,211,855 11,519,134
------------
45,206,043
------------
CONSUMER STAPLES -- (3.8%)
Lien Hwa Industrial Corp. 15,161,855 8,216,735
Uni-President Enterprises Corp. 11,447,220 15,303,570
------------
23,520,305
------------
FINANCIALS -- (9.5%)
Cathay Financial Holding Co., Ltd. 5,993,788 11,662,360
China Development Financial Holding Corp. 36,871,940 12,398,582
Fubon Financial Holdings Co., Ltd. 12,603,000 11,253,046
Ruentex Development Co., Ltd. 9,477,000 8,044,204
Yuanta Financial Holdings Co., Ltd. 26,635,545 15,652,111
------------
59,010,303
------------
INDUSTRIALS -- (1.1%)
Wah Lee Industrial Corp.# 3,998,856 6,697,180
------------
INFORMATION TECHNOLOGY -- (4.5%)
Powertech Technology Inc. 3,939,210 11,291,262
Taiwan Secom Co., Ltd.# 4,738,000 8,352,715
Tripod Technology Corp. 3,352,867 8,472,198
------------
28,116,175
------------
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ---------- --------------
COMMON STOCK AND OTHER EQUITY INTERESTS (CONTINUED)
TAIWAN (CONTINUED)
MATERIALS -- (2.7%)
China Metal Products Co., Ltd.# 8,392,675 $ 11,644,696
Yieh United Steel Corp.# 11,379,600 4,829,578
------------
16,474,274
------------
TOTAL TAIWAN -- (Cost $141,465,910) 28.9% 179,024,280
------------
UNITED KINGDOM
HEALTH CARE -- (1.5%)
China Medical System Holdings, Ltd.(2)#+ 3,623,188 9,077,974
------------
TOTAL UNITED KINGDOM -- (Cost $9,940,990) 1.5% 9,077,974
------------
UNITED STATES
CONSUMER DISCRETIONARY -- (1.3%)
The9, Ltd., ADR(1)*# 356,200 7,964,632
------------
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2008 (UNAUDITED)
ENERGY -- (0.9%)
Far East Energy Corp.*#+ 10,974,134 5,487,067
------------
HEALTH CARE -- (3.3%)
Mindray Medical International, Ltd., ADR(1) 367,000 14,661,650
WuXi PharmaTech Cayman Inc., ADR(1)* 341,141 6,181,475
------------
20,843,125
------------
TOTAL UNITED STATES -- (Cost $35,410,247)
5.5% 34,294,824
------------
TOTAL COMMON STOCK AND OTHER EQUITY INTERESTS --
(Cost $357,489,440) 72.0% 445,901,836
------------
EQUITY LINKED SECURITIES
CONSUMER DISCRETIONARY -- (1.1%)
Wuliangye Yibin Co., Ltd. Access Product (expiration
01/20/10) 144A,*(2)(3) 2,200,000 6,692,400
------------
ENERGY -- (1.4%)
China Yangtze Power Co., Ltd. Access Product
(expiration 10/26/10) 144A,(2)(4) 4,169,077 8,942,670
------------
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ---------- --------------
EQUITY LINKED SECURITIES (CONTINUED)
FINANCIALS -- (1.1%)
Financial Street Holding Co., Ltd. Access Product
(expiration 2/13/12) 144A,(2)(4)* 5,743,906 $ 7,019,053
------------
INDUSTRIALS -- (6.1%)
China Vanke Co., Ltd. Access Product (expiration 01/20/10)
144A,(2)(3) 4,533,840 5,635,563
Daqin Railway Co., Ltd. Access Product (expiration 11/02/11)
144A,(2)(4) 6,907,000 13,164,742
Shanghai International Airport Co., Ltd. Access Product
(expiration 01/20/10) 144A,(2)(3) 1,816,700 4,781,555
Shanghai Tunnel Engineering Co., Ltd. Access Product
(expiration 01/17/12) 144A,(2)(3) 4,439,247 5,855,367
Shanghai Zhenhua Port Machinery Co., Ltd. Access Product
(expiration 10/26/10) 144A,(2)(4) 4,462,752 8,327,495
------------
37,764,722
------------
MATERIALS -- (1.9%)
Qinghai Salt Lake Potash Co., Ltd. Access Product
(expiration 10/26/10) 144A,(2)(4) 887,909 11,454,026
------------
TOTAL EQUITY LINKED SECURITIES -- (Cost $50,963,686) 11.6% 71,872,871
------------
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2008 (UNAUDITED)
DIRECT INVESTMENTS
CONSUMER DISCRETIONARY -- (6.2%)
Queenbury Investments, Ltd., (Huiyan)
(acquired 05/06/08)(2)(5)#+ 450 38,459,700
------------
INDUSTRIALS -- (2.7%)
Highlight Tech Corp., (acquired 09/11/07)(2)(5)#+ 3,366,893 5,993,070
Qingdao Bright Moon, (acquired 02/28/08)(2)(5)#+ 31,827,172 7,001,978
Wuxi PAIHO, (acquired 09/17/07)(5)# 11,734,701 3,679,990
------------
16,675,038
------------
INFORMATION TECHNOLOGY -- (1.5%)
China Silicon Corp. Warrants (expiration 11/30/10)(2)(5)#+ 685,450 --
China Silicon Corp., Series A Preferred
(acquired 11/30/07)(2)(5)#+ 27,418 6,525,484
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ---------- --------------
DIRECT INVESTMENTS (CONTINUED)
INFORMATION TECHNOLOGY (CONTINUED)
Sino Twinwood Pte Ltd., (acquired 05/02/07)(2)(5)#+ 500,000 $ 3,050,000
teco Optronics Corp., (acquired 04/26/04)(5)#+ 1,861,710 --
------------
9,575,484
------------
TOTAL DIRECT INVESTMENTS -- (Cost $65,631,412) 10.4% 64,710,222
------------
COLLATERAL FOR SECURITIES ON LOAN++ -- (9.2%)
Securities Lending Quality Trust 57,509,932 56,929,081
------------
TOTAL COLLATERAL FOR SECURITIES ON LOAN++ --
(Cost $57,509,932) 9.2% 56,929,081
------------
PAR/
PRINCIPAL
AMOUNT
----------
SHORT TERM INVESTMENTS
UNITED STATES
Repurchase Agreement with State Street Bank and Trust,
0.20%, 08/01/08## 26,106,000 26,106,000
------------
TOTAL UNITED STATES -- (Cost $26,106,000) 4.2% 26,106,000
------------
TOTAL INVESTMENTS -- (Cost $557,700,470) ** 107.4% 665,520,010
------------
OTHER ASSETS AND LIABILITIES (7.4)% (45,841,027)
----- ------------
NET ASSETS 100.0% $619,678,983
===== ============
'
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2008 (UNAUDITED)
Notes to Schedule of Investments
(A) 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. Open end investment companies are valued at net
asset value per share. 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 at fair value using methods
determined in good faith by or at the direction of the Board of Directors
considering relevant factors, data and information including, if relevant,
the market value of freely tradable securities of the same class in the
principal market on which such securities are normally traded. Direct
Investments not traded on an exchange are valued at fair value as
determined by the Board of Directors based on financial and other
information supplied by the Direct Investment Manager regarding each Direct
Investment. 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.
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.
* Denotes non-income producing security.
# Illiquid security.
+ Affiliated issuer, as defined in the Investment Company Act of 1940, as
amended, includes issuers in which the Fund held 5% or more of the
outstanding voting securities.
++ As of July 31, 2008, the Fund had loaned securities which were
collateralized by cash and short term investments. The value of the
securities on loan and the value of the related collateral were as follows:
VALUE OF VALUE OF
VALUE OF CASH NON-CASH TOTAL
SECURITIES COLLATERAL COLLATERAL* COLLATERAL
----------- ----------- ----------- -----------
$55,527,549 $56,929,081 $933,862 $57,862,943
* The Fund cannot repledge or resell this collateral. The non-cash
collateral is comprised of government securities.
ADR American Depositary Receipt.
144A Securities restricted for resale to Qualified Institutional Buyers.
(1) A portion or all of the security was held on loan. As of July 31, 2008, the
market value of the securities loaned was $55,527,549.
(2) Security valued at fair value using methods determined in good faith by or
at the direction of the Board of Directors.
(3) Equity linked securities issued by Citigroup Global Markets Holdings.
(4) Equity linked securities issued by Credit Lyonnais (CLSA).
(5) 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 valued in good faith by the Board of Directors
at fair market value. 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 China Fund, Inc.'s (the "Fund") policies for
valuing Direct 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. The Fund does not have the
right to demand that such securities be registered.
## Repurchase agreement, dated 07/31/2008, due 08/01/2008 with repurchase
proceeds of $26,106,145 is collateralized by US Treasury Bill 1.70% due
12/11/2008 with a market value of $26,630,768.
** At July 31, 2008, the cost of investment securities for tax purposes was
$556,377,782. Net unrealized appreciation of investment securities for tax
purposes was $108,400,391, consisting of unrealized gains of $160,657,397
on securities that had risen in value since their purchase and $52,257,006
in unrealized losses on securities that had fallen in value since their
purchase.
In September 2006, Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (SFAS 157), was issued and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. Management is currently evaluating the impact the adoption of SFAS
157 will have on the Fund's financial statement disclosures.
In addition, in March 2008, the Financial Accounting Standards board ("FASB")
issued Statement of Financial Accounting Standards No. 161, "Disclosures about
Derivative Instruments and Hedging Activities" ("SFAS 161"). SFAS 161 is
effective for fiscal years and interim periods beginning after November 15,
2008. SFAS 161 requires enhanced disclosures about the Fund's derivative and
hedging activities. Management is currently evaluating the impact the adoption
of SFAS 161 will have on the Fund's financial statement disclosures.
ITEM 2. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers have
concluded that the registrant's disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date
within 90 days of the filing date of this Form N-Q that includes the
disclosure required by this paragraph based on their evaluation of the
controls and procedures required by Rule 30a-3(b) under the 1940 Act (17
CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934 (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's last fiscal quarter
that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 3. EXHIBITS.
The certification required by Rule 30a-2 of the 1940 Act is attached as an
exhibit to this filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
THE CHINA FUND, INC.
By: /s/ Gary L. French
Gary L. French
President and Chief Executive Officer
Date: September 29, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Gary L. French
Gary L. French
President and Chief Executive Officer
Date: September 29, 2008
By: /s/ William C. Cox
William C. Cox
Treasurer and Chief Financial Officer
Date: September 29, 2008