exv99w1

DIRECT INVESTMENTS* (3.8%)

Captive Finance
Tomoike Industrial (H K) Ltd
A-S China Plumbing Products
Kowloon Development (34 HK)

Financials
Industrials
Industrials
Real estate

1.4% 1.1% 1.0% 0.3%

EX-99.1 3 b47224cfexv99w1.htm INSIGHT NEWSLETTER exv99w1


IN BRIEF

Net asset value per share*	US$21.23
Market price*	US$23.13
Premium/discount*		8.95%
Fund size*	US$213.81


At 30 June 2003

	China Fund			MSCI Golden
		NAV			Dragon

One month return*		8.7	%		4.6	%
One year return*		30.7	%		-7.8	%


* Source: State Street Corporation/Martin Currie Inc

MANAGERS COMMENTARY

Everyone is coming to China in September. At least this is the impression we gained from recent visits to investors in Europe and the US. Now that the SARS-related travel ban has been lifted, there are clear signs of pent-up demand as many people plan to visit China after the summer vacation.

Domestic liquidity is already strong. The China region, already the custodian of one-fifth of the world’s foreign exchange reserves, benefits from pegging its currency to a weakening US dollar. There was increased speculation in June about the possibility of currency revaluation. We believe that this will happen, but not until 2004, when the expediencies of the presidential cycle cause the US to support Japan and the EU in bringing pressure to bear on Beijing.

The expectation of qualified domestic institutional (QDI) Chinese investors being allowed to invest in Hong Kong boosted the prices of some of our ‘H’ share holdings. In the event, we expect QDI to be relatively restricted in size, certainly less than the amount which foreign investors are about to start remitting into the ‘A’ share market. Moreover, the stocks targeted by QDI funds are unlikely to be those already available in the domestic ‘A’ share market. Some short correction is likely after the recent run, but Chinese stocks are still very cheap relative to most other markets. We expect the new Chinese bull market to resume in the autumn.

INVESTMENT STRATEGY

Your Fund is 98.1% invested with holdings in 58 stocks, of which 4 are unlisted. There have been few alterations to the portfolio in June. We reduced our holding in the rather expensive Shanghai Friendship Group in favour of CIMC, the world’s largest container maker, whose sales are ahead of forecast. In Taiwan, we cut our losses in industrial PC maker Advantech, which has been hurt by poor currency hedging, in favour of China Motors. The company’s mainland subsidiary assembling commercial and passenger cars is going from strength to strength.

Chris Ruffle, Martin Currie Inc

DIRECT INVESTMENT MANAGERS COMMENTARY
The World Health Organization has lifted its travel advisory for Beijing, confirming that SARS has been controlled in China. Daily life and business activities have largely returned to normal. Other than the still troubled tourism and travel businesses, most companies are seeing trading conditions return to normal.

A-S China Plumbing Products Ltd. (ASPPL) is listing its shares by introduction on Hong Kong’s GEM market. Trading is expected to commence on July 11, 2003.

Business reviews of Tomoike Industrial and Captive Finance have recently been completed. Both companies are operating in line with their budgets despite the SARS disruption earlier in the year.

After the listing of ASPPL, all the legacy investments made by the previous Direct Investment Manager will have been exited (Road King Infrastructure, New World Sun City and Moulin International) or have an exit channel (ASPPL). We will focus on making new Direct Investments to further enhance the Fund’s performance.

KOH Kuek Chiang, Asian Direct Capital Management


FUND DETAILS*

Market cap		$248.61m
Shares outstanding		10,073,173 shares
Exchange listed		NYSE
Listing date		July 10, 1992
Investment manager		Martin Currie Inc
Direct investment manager		Asian Direct Capital
		Management


ASSET ALLOCATION*


	Hong Kong	43.3%
	Taiwan	29.2%
	New York	17.2%
	Direct	3.8%
	B shares	2.3%
	Singapore	1.1%
	Cash	1.3%


SECTOR ALLOCATION*

	% of		MSCI Golden
	net assets			Dragon %

Information technology		23.2			22.3
Industrials		19.2			14.3
Consumer discretionary		14.3			7.2
Materials		11.0			6.0
Utilities		8.2			10.4
Consumer staples		7.8			0.7
Financials		5.8			27.0
Energy		3.0			4.4
Health care		3.0			0.1
Telecommunications		2.3			7.6
Real estate		0.3			—
Cash		1.9			—
Total		100.0			100.0


*PERFORMANCE (IN US$ TERMS)**

	NAV		Market price
	%			%

One month		8.7			16.5
Calendar year to date		34.5			68.2
3 years **		17.2			35.3

FUND PERFORMANCE

One

Three

Year

One

Three**

Five**

Since#**

month

months

to date

year

years

launch

The China Fund, Inc.

8.7

25.6

34.5

30.7

17.2

5.9

MSCI Golden Dragon

4.6

13.9

9.4

-7.8

-15.6

0.2

—

Hang Seng Chinese Enterprise Index

10.8

24.7

37.0

25.8

12.7

7.7

—

* Source: State Street Corporation/Martin Currie Inc.

# The fund was launched on July 10, 1992.

** Annualised return

PERFORMANCE IN PERSPECTIVE

THE CHINA FUND INC. PREMIUM/DISCOUNT

DIVIDEND HISTORY CHART*

All charts as of 30 June, 2003. *Source: State Street Corporation


THE PORTFOLIO - IN FULL							AT 30 JUNE 2003

Sector	Company (BBG ticker)		Price		Holding		Value $		% of portfolio

Hong Kong 43.9% Fountain Set (Holdings) Ltd		420 HK	HK$6.95			12,750,000		11,363,272		5.3	%
Chaoda Modern Agriculture (Holdings) Ltd		682 HK	HK$1.35			41,038,000		7,104,416		3.3	%
TCL International Holdings Ltd		1070 HK	HK$1.65			32,318,000		6,796,679		3.2	%
Yanzhou Coal Mining Co.		1171 HK	HK$3.63			13,786,000		6,408,475		3.0	%
Sinotrans Limited-H		598 HK	HK$2.20			20,065,000		5,660,702		2.6	%
BYD Co		1211 HK	HK$17.6			2,525,000		5,650,218		2.6	%
Shenzhen Expressway Co., Ltd		548 HK	HK$2.00			21,494,000		5,512,589		2.6	%
Xinao Gas Holdings Ltd		2688 HK	HK$2.45			13,976,000		4,390,939		2.1	%
Anhui Conch Cement		914 HK	HK$4.43			7,726,000		4,384,059		2.0	%
Anhui Expressway Co., Ltd		995 HK	HK$1.91			17,778,000		4,354,364		2.0	%
Brilliance China Automotive Holdings, Ltd		1114 HK	HK$2.20			12,882,000		3,634,246		1.7	%
TPV Technology, Ltd		903 HK	HK$2.73			9,968,000		3,483,236		1.6	%
Tack Fat Group International Ltd		928 HK	HK$0.69			37,296,000		3,300,044		1.5	%
Wah Sang Gas		8035 HK	HK$0.92			27,778,000		3,277,157		1.5	%
Proview Intl Holdings Ltd		334 HK	HK$1.03			17,644,000		2,330,466		1.1	%
LifeTec Group, Ltd		1180 HK	HK$0.10			168,492,000		2,247,093		1.1	%
Natural Beauty Bio-Technology Ltd		157 HK	HK$0.52			29,320,000		1,955,131		0.9	%
Golden Meditech Co Ltd		8180 HK	HK$1.27			11,950,000		1,946,167		0.9	%
Wanyou Fire Safety		8201 HK	HK$0.28			53,565,000		1,923,302		0.9	%
Beijing Capital International Airport Co., Ltd		694 HK	HK$1.90			7,520,000		1,832,229		0.9	%
Jingwei Textile Machinery Co., Ltd		350 HK	HK$1.91			7,436,000		1,821,299		0.9	%
Sino Golf Holdings Ltd		361 HK	HK$1.10			10,953,000		1,545,020		0.7	%
Asia Zirconium		395 HK	HK$0.90			8,428,000		972,692		0.5	%
Leefung-Asco Printers Holdings Ltd		623 HK	HK$1.37			3,602,000		632,809		0.3	%
Mainland Headwear Holdings		1100 HK	HK$2.58			1,626,000		536,916		0.3	%
Arcontech, Corp		8097 HK	HK$0.17			18,386,000		407,889		0.2	%
Essex Bio-Technology Ltd		8151 HK	HK$0.10			24,278,166		311,332		0.2	%

Taiwan 29.2% Merry Electronics		2439 TT	NT$47.6			3,190,400		4,387,837		2.0	%
China Metal Products		1532 TT	NT$28.3			5,186,000		4,240,503		2.0	%
Chicony Electronics Co., Ltd		2385 TT	NT$64.0			2,156,000		3,986,824		1.9	%
Synnex Technologies International, Corp		2347 TT	NT$48.5			2,682,400		3,758,925		1.8	%
Polaris Securities Co., Ltd		6011 TT	NT$16.6			7,740,164		3,712,416		1.7	%
Wintek Corp.		2384 TT	NT$26.8			4,500,000		3,484,542		1.6	%
Ability Enterprise Corp		2374 TT	NT$31.6			3,642,000		3,325,258		1.6	%
Taiwan Green Point Enterprises Co., Ltd		3007 TT	NT$68.0			1,635,000		3,212,367		1.5	%
Fubon Financial Holdings		2881 TT	NT$27.7			3,953,952		3,164,533		1.5	%
Data Systems Consulting Co		2477 TT	NT$29.2			3,586,000		3,025,461		1.4	%
Taiwan Hon Chuan Enterprise		9939 TT	NT$48.4			2,136,000		2,987,067		1.4	%
China Motor Co		2204 TT	NT$63.5			1,600,000		2,935,568		1.4	%
Cheng Shin Rubber		2105 TT	NT$42.1			2,330,000		2,834,239		1.3	%
Vanguard International Semiconductor Corp.		5347 TT	NT$6.80			14,000,000		2,750,650		1.3	%
Ho Tung Chemical, Corp		1714 TT	NT$14.3			6,395,904		2,642,630		1.2	%
Eva Airways		2618 TT	NT$12.4			6,991,150		2,504,775		1.2	%
Sinopac Holdings Co		2890 TT	NT$12.7			6,746,745		2,465,947		1.1	%
Altek Corp		3059 TT	NT$88.0			775,000		1,970,529		0.9	%
Tainan Enterprises		1473 TT	NT$41.6			1,546,000		1,858,237		0.9	%
Chunghwa Telecom Co., Ltd		2412 TT	NT$51.0			1,146,000		1,688,703		0.8	%
Taiwan FamilyMart		5903 TT	NT$40.0			1,369,000		1,582,202		0.7	%

New York 17.2% Sohu.com Inc		Sohu US	US$59.6			711,586		24,307,778		11.4	%
Chinadotcom, Corp		China US	US$7.91			1,473,654		12,378,693		5.8	%

Direct 3.8% Captive Finance Ltd						2,000,000		3,045,000		1.4	%
Tomoike Industrial (H.K.) Ltd						825,000		2,352,400		1.1	%
A-S China Plumbing Products, Ltd						450		2,089,260		1.0	%
Kowloon Development		34 HK				1,530,000		642,556		0.3	%

B shares 2.9% China International Marine Containers Co., Ltd.		200039 CH	HK$8.91			2,442,747		2,791,031		1.3	%
Luthai Textile Co., Ltd		200726 CH	HK$4.39			3,119,794		1,756,300		0.8	%
Shanghai Friendship Group Co., Inc		900923 CH	US$0.73			2,303,437		1,679,206		0.8	%

Singapore 1.1% People’s Food Holding		PFH SP		S$0.96		4,400,000		2,398,978		1.1	%

Cash 1.9%

OBJECTIVE

The investment objective of the Fund is to achieve long term capital appreciation through investment in companies and other entities with significant assets, investments, production activities, trading or other business interests in China or which derive a significant part of their revenue from China.

The Board of Directors of the Fund has adopted an operating policy of the Fund, effective June 30, 2001, that the Fund will invest at least 80% of its assets in China companies. For this purpose, “China companies” are (i) companies for which the principal securities trading market is in China; (ii) companies for which the principal securities trading market is outside of China or in companies organised outside of China, that in both cases derive at least 50% of their revenues from goods or services sold or produced, or have a least 50% of their assets in China; and (iii) companies organized in China. Under the policy, China will mean the People’s Republic of China, including Hong Kong, and Taiwan. The Fund will provide its stockholders with at least 60 days’ prior notice of any change to the policy described above.

The fundamental policy, which applies to not less than 65% of the Fund’s assets as set out in the Fund’s prospectus dated July 10, 1992, remains in place. The fundamental policy is the same as the operating policy set out above, except that China only includes the People’s Republic of China.

CONTACTS

The China Fund, Inc.
c/o State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Tel: (1) 888 CHN-CALL (246 2255)
www.chinafundinc.com

Important information: This newsletter is issued by Martin Currie Inc, Saltire Court, 20 Castle Terrace, Edinburgh, Scotland. Martin Currie Inc is regulated by the FSA and registered with the Securities Exchange Commission as an investment adviser. Information herein is believed to be reliable but has not been verified by Martin Currie Inc. Martin Currie Inc makes no representation or warranty and does not accept any responsibility in relation to such information or for opinion or conclusion which the reader may draw from the newsletter. This newsletter does not constitute an offer of shares. Martin Currie Inc, its ultimate and intermediate holding companies, subsidiaries, affiliates, clients, directors or staff may, at any time, have a position in the market referred to herein, and may buy or sell securities, currencies, or any other financial instruments in such markets. The information or opinion expressed in this newsletter should not be construed to be a recommendation to buy or sell the securities, commodities, currencies, or financial instruments referred to herein. Investors are advised that they will not generally benefit from the rules and regulations of the United Kingdom Financial Services and Markets Act 2000 and the Financial Services Authority for the protection of investors nor benefit from the United Kingdom Financial Services Compensation Scheme, nor have access to the Financial Services Ombudsman in the event of a dispute. Investors will also have no rights of cancellation under the FSA’s Conduct of Business Sourcebook of the United Kingdom. Please remember that past performance is not necessarily a guide to the future. Market and currency movements may cause the value of the shares and the income from them to fluctuate and you may get back less than you invested when you decide to sell your shares.