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(MARTIN CURRIE LOGO)

IN BRIEF


Net asset value per share	US$	26.27
Market price	US$	29.15
Pemium/(discount)		10.96	%
Fund size	US$	264.9	m


At October 29, 2004		US$ returns


	China Fund NAV		MSCI Golden Dragon*
	%		%
One month		0.0		-0.9
One year		2.1		4.9

Past performance is not a guide to future returns.

Source: State Street Corporation. *Source for index data: MSCI.

MANAGER’S COMMENTARY

After their brief rally in September, Chinese markets retreated in October. The MSCI Golden Dragon fell by 0.9%.Published statistics showed GDP growth remaining strong, if marginally slower than in the second quarter (9.1% versus 9.6%), and consumer inflation moderating slightly (5.3% year-on-year in September compared to 5.4% in August). But having avoided action while inflation was rising, the government chose the moment when it seems to have peaked to raise interest rates (+27 basis points on one-year loans and deposits, to 5.58% and 2.25% respectively). The main target seems to be some overexcitement in parts of the property market, which the government itself helped spur when it stopped land auctions earlier this year. This rise has raised fears that it will be the first of many. But as this it is the first rise in nine years, it seems likely that the government will take a few months at least to assess the impact. Also, food prices now seem to be falling and, given their weighting in the consumer price index, this trend is likely to prevail over rising energy costs. There were additionally a couple of disappointing Q3 results from commodity stocks (e.g. Anhui Conch Cement and Ma’anshan Steel), squeezed by rising costs and increasing supply. This undermined confidence in the sector which had led the rally.

INVESTMENT STRATEGY

Your fund is 94.4% invested with holdings in 58 companies, of which four are unlisted.

Your fund continues to focus on domestically-orientated consumer stocks. A retreat in commodity prices should ease margin pressure for a number of these companies. Chinese property stocks have suffered from the rate rise, but given that real interest rates remain negative, and the lack of attractive alternative investments, property is likely to return to favour. Having made one move on interest rates, the next seems likely to be on the currency.

One threat to prices comes from the heavy promised supply of new equity in Hong Kong. There is certainly demand for attractively priced IPOs (your fund participated in the well-received China Power IPO). But mega deals tend to drag down valuations in the corresponding sectors before pricing of the deal. This has happened for telecoms (Netcom) and seems likely to apply to airlines (Air China) and banks (Minsheng Bank, China Construction Bank etc.) In the case of the oversold telecoms, we are taking advantage of this by subscribing to Netcom. We will finance these deals, and the forthcoming dividend, by taking profits on internet and textile names.

After a long period of underperformance, we expect Taiwan’s market to rally ahead of the MSCI re-weighting and December election.

MESSAGE TO INVESTORS

As we approach the end of our financial year it seems likely that the company will pay a dividend in January, which is a result of profits taken early in the year. Dividends can be taken in cash or stock. Dividend shares will be issued at the greater of net asset value or a 5% discount to the market price. The Fund is currently trading at a 10.96% premium to net asset value.

Chris Ruffle, Martin Currie Inc

DIRECT INVESTMENT MANAGER’S COMMENTARY

The central government continues to implement measures to slow the economy and on October 28 made the first interest rate rise for nine years. This is an important and desirable shift from the administrative measures used to date. As in 1993-5 this rise is likely to be the first of a number of small adjustments, which will have a substantial cumulative effect and reposition the economy on a more stable track for future growth.

These changes, coupled with rising inflation in raw material prices, are leading to a margin squeeze which is impacting the profitability of some companies. All the companies in the Direct Investment portfolio are in sectors that are less adversely affected by these changes. Liquidity in the PRC continues to tighten and this is creating opportunities to invest in high quality companies on unusually attractive terms. We are focusing our new deal activity on companies where we can secure both good deal terms and robust entry valuations.

One of the direct investment portfolio companies, Tomoike Industrial (HK) Limited, is undergoing a pre-listing restructuring and has lodged a preliminary prospectus with the Monetary Authority of Singapore with a view for an IPO on the Singapore Stock Exchange under the name of CDW Holding Limited. A successful IPO could lead to an increase in the carrying value of the investment. The preliminary prospectus can be viewed at the website of the Monetary Authority of Singapore: http://masnet.mas.gov.sg/opera/sdrprosp.nsf

KOH Kuek Chiang, Asian Direct Capital Management

FUND DETAILS


Market cap		US$305.7m
Shares outstanding		10,081,913
Exchange listed		NYSE
Listing date		July 10, 1992
Investment adviser		Martin Currie Inc
Direct investment manager		Asian Direct Capital Management

Source: State Street Corporation.

ASSET ALLOCATION

(ASSET ALLOCATION PIE CHART)


Hong Kong	51.2	%
Taiwan	28.2	%
B Shares	2.8	%
New York	7.3	%
Direct	4.9	%
Other assets & liabilities	5.6	%

Source: State Street Corporation.

SECTOR ALLOCATION


	The China			MSCI Golden
	Fund, Inc			Dragon
Industrials		21.3	%		13.2	%
Consumer discretionary		17.7	%		6.8	%
Information technology		14.5	%		16.9	%
Materials		9.1	%		6.9	%
Utilities		9.1	%		9.4	%
Financials		7.7	%		32.4	%
Consumer staples		7.2	%		0.5	%
Healthcare		3.4	%		0.1	%
Telecommunications		2.7	%		7.6	%
Energy		1.7	%		6.2	%
Other assets & liabilities		5.6	%		—
Total		100.0	%		100.0	%

Source: State Street Corporation.


PERFORMANCE		(US$ RETURNS)


	NAV		Market price
	%		%
One month		0.0		-2.5
Year to date		0.3		-28.5
3 years (annualized)		28.8		42.8

Past performance is not a guide to future returns.

Source: State Street Corporation

DIRECT INVESTMENTS (4.9%)


Tomoike Industrial (HK) Ltd	Industrials	2.4	%
Global E Business	Information technology	1.2	%
Captive Finance	Financials	1.1	%
teco Optronics	Information technology	0.2	%

15 LARGEST LISTED INVESTMENTS (46.9%)


Chaoda Modern Agriculture	Consumer staples	5.6	%
Shanda Interactive	Consumer discretionary	3.8	%
BYD	Industrials	3.4	%
TCL International	Consumer discretionary	3.3	%
Sohu.com	Information technology	3.3	%
Anhui Expressway	Utilities	3.2	%
Xinao Gas	Utilities	3.0	%
Shenzhen Expressway	Utilities	2.9	%
Cathay Financial	Financials	2.8	%
China International Marine	Industrials	2.8	%
Comba Telecom Systems	Telecommunications	2.7	%
China Metal Products	Materials	2.6	%
Merry Electronics	Consumer discretionary	2.6	%
Golden Meditech	Energy	2.5	%
Synnex Technologies	Consumer discretionary	2.4	%

Source: State Street Corporation


FUND PERFORMANCE (BASED ON NET ASSET VALUE)		(US$ RETURNS)


	One		Three		Calendar		One		Three		Five		Since
	month		months		year to date		year		years		years		launch
	%		%		%		%		% pa		% pa		% pa
The China Fund, Inc.		0.0		7.1		0.3		2.1		28.8		17.5		7.9
MSCI Golden Dragon		-0.9		7.3		2.2		4.9		14.8		-2.0		n/a
Hang Seng Chinese Enterprise		-2.9		4.1		-10.5		16.3		34.3		15.8		n/a

Past performance is not a guide to future returns.

Source: State Street Corporation. Launch date July 10, 1992. Three year, five year and since launch returns are all annualized.

Source for index data: MSCI for the MSCI Golden Dragon and Copyright 2002 Bloomberg LP for the Hang Seng Chinese Enterprise.

PERFORMANCE IN PERSPECTIVE

(PERFORMANCE IN PERSPECTIVE LINE GRAPH)

Past performance is not a guide to future returns.

Source: Martin Currie Inc as of October 31, 2004.

THE CHINA FUND INC. PREMIUM/DISCOUNT

(THE CHINA FUND INC. PREMIUM LINE GRAPH)

Past performance is not a guide to future returns.

Source: Martin Currie Inc as of October 31, 2004.

DIVIDEND HISTORY CHART

(DIVIDEND HISTORY BAR CHART)


Total	0.91	0.61	0.09	0.08	0.50	0.08	0.11	0.00	0.13	0.21	1.78
Income	0.09	0.01	0.09	0.08	0.50	0.08	0.11	0.00	0.13	0.06	0.07
Long term capital	0.04	0.24	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.67
Short term capital	0.79	0.36	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.15	1.04

Past performance is not a guide to future returns.

Source: State Street Corporation.


THE PORTFOLIO — IN FULL		AT OCTOBER 31, 2004


Sector	Company (BBG ticker)		Price	Holding		Value $		% of portfolio
Hong Kong									51.2	%
Chaoda Modern Agriculture		682 HK	HK$2.7		43,089,900		14,808,953		5.6	%
BYD		1211 HK	HK$21.9		3,225,000		9,074,003		3.4	%
TCL International		1070 HK	HK$2.1		32,318,000		8,823,248		3.3	%
Anhui Expressway		995 HK	HK$3.8		17,778,000		8,622,336		3.2	%
Xinao Gas		2688 HK	HK$4.4		13,976,000		7,810,831		3.0	%
Shenzhen Expressway		548 HK	HK$2.8		21,494,000		7,663,114		2.9	%
Comba Telecom Systems		2342 HK	HK$3.6		15,356,000		7,003,764		2.7	%
Golden Meditech		8180 HK	HK$1.9		27,900,000		6,738,871		2.5	%
TPV Technology		903 HK	HK$4.7		9,968,000		6,019,092		2.3	%
Weichai Power		2338 HK	HK$16.1		2,536,000		5,229,370		2.0	%
Solomon Systech		2878 HK	HK$2.0		20,698,000		5,212,061		2.0	%
Fountain Set		420 HK	HK$5.9		6,714,000		5,046,175		1.9	%
Sinotrans		598 HK	HK$2.5		12,835,000		4,163,728		1.6	%
Yanzhou Coal Mining		1171 HK	HK$10.3		3,146,000		4,163,140		1.6	%
China Shipping Container Lines		2866 HK	HK$3.3		9,221,000		3,879,845		1.5	%
China Fire Safety		8201 HK	HK$0.6		50,380,000		3,689,420		1.4	%
Fujian Zijin Mining		2899 HK	HK$3.0		7,400,000		2,875,956		1.1	%
Weiqiao Textile		2698 HK	HK$11.4		1,854,500		2,692,343		1.0	%
Proview International		334 HK	HK$1.4		13,644,000		2,524,232		0.9	%
Natural Beauty Bio-Technology		157 HK	HK$0.6		32,780,000		2,316,310		0.9	%
Beiren Printing Machinery		187 HK	HK$2.5		7,000,000		2,225,862		0.8	%
Li Ning		2331 HK	HK3.1		5,600,000		2,212,372		0.8	%
China Rare Earth		769 HK	HK$1.1		15,254,000		2,136,168		0.8	%
Nanjing Dahe Outdoor Media		8243 HK	HK$0.4		37,500,000		2,119,869		0.8	%
Ocean Grand Chemicals		2882 HK	HK$0.9		17,379,000		2,098,832		0.8	%
Asia Aluminium		930 HK	HK$0.9		18,000,000		2,035,074		0.8	%
Sino Golf		361 HK	HK$1.2		11,835,000		1,885,450		0.7	%
Asia Zirconium		395 HK	HK$1.0		13,196,000		1,661,474		0.6	%
China Power International		2380 HK	HK$3.1		1,029,000		399,913		0.2	%
Arcontech		8097 HK	HK$0.2		18,386,000		408,657		0.1	%
Taiwan									28.2	%
Cathay Financial		2882 TT	NT$64.0		3,862,000		7,399,132		2.8	%
China Metal Products		1532 TT	NT$36.3		6,328,714		6,877,184		2.6	%
Merry Electronics		2439 TT	NT$75.5		3,012,016		6,807,580		2.6	%
Synnex Technologies		2347 TT	NT$47.9		4,465,604		6,403,306		2.4	%
Taiwan Green Point		3007 TT	NT$92.0		2,155,749		5,937,102		2.2	%
Fubon Financial		2881 TT	NT$31.5		5,453,952		5,142,927		2.0	%
Polaris Securities		2854 TT	NT$17.1		9,407,587		4,815,738		1.8	%
Cheng Shin Rubber		2105 TT	NT$39.7		3,305,974		3,928,968		1.5	%
Radiant Opto-Electronics		6176 TT	NT$59.5		1,890,000		3,366,412		1.3	%
Asia Optical		3019 TT	NT$159.0		686,937		3,269,660		1.2	%
Chicony Electronics		2385 TT	NT$35.0		3,001,152		3,144,449		1.2	%
Tripod Technology		3044 TT	NT$39.5		2,503,413		2,960,180		1.1	%
Wintek		2384 TT	NT$37.0		2,421,104		2,681,660		1.1	%
Data Systems Consulting		2447 TT	NT$20.6		4,237,987		2,613,457		1.0	%
Taiwan FamilyMart		5903 TT	NT$52.0		1,567,231		2,439,635		0.9	%
Vanguard International Semiconductor		5347 TT	NT$15.8		3,122,163		1,476,730		0.5	%
Yieh United Steel		9957 TT	NT$13.7		3,500,000		1,435,414		0.5	%
Soft-World International		5478 TT	NT$51.0		933,457		1,425,125		0.5	%
ET Internet Technology		2614 TT	NT$16.1		2,877,000		1,386,610		0.5	%
Taiwan Hon Chuan Enterprise		9939 TT	NT$23.9		1,843,403		1,318,884		0.5	%
B shares									2.8	%
China International Marine		200039 CH	HK$14.7		3,908,395		7,376,415		2.8	%
New York									7.3	%
Shanda Interactive		SNDA US	US$30.3		324,300		9,855,153		3.8	%
Sohu.com		Sohu US	US$16.8		526,286		8,815,291		3.3	%
Chindex International		CHDX US	US$7.9		69,987		554,997		0.2	%
Direct									4.9	%
Tomoike Industrial					825,000		6,344,492		2.4	%
Global E Business					40,000		3,040,462		1.2	%
Captive Finance					2,000,000		3,045,000		1.1	%
teco Optronics					1,861,710		561,406		0.2	%
Other assets & liabilities									5.6	%

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 and approved by Martin Currie Inc (MC Inc), as investment adviser. MC Inc is authorised and regulated by the Financial Services Authority (FSA) and incorporated under limited liability in New York, USA. Registered in Scotland (No BR2575), registered address Saltire Court, 20 Castle Terrace, Edinburgh, EH1 2ES. Information herein is believed to be reliable but has not been verified by MC Inc. MC 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.

China Fund Inc (the fund) is classified as a ‘non-diversified’ investment company under the US Investment Company Act of 1940. It meets the criteria of a closedended US mutual fund and its shares are listed on the New York Stock Exchange. MC Inc has been appointed investment adviser to the listed equity portfolio of the fund. Asian Direct Capital Management is the direct investment manager to the fund.

This newsletter does not constitute an offer of shares. MC 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.

The information provided in this report should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased.

It should not be assumed that any of the securities transactions or holdings discussed here were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed 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 FSA 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 a guide to future returns. Markets and currency movements can 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.