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Table of Contents

 
 
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 Service)   Copy to:
     
Elizabeth A. Watson
Secretary
The China Fund, Inc.
4 Copley Place, 5th Floor 		  Leonard B. Mackey, Jr., Esq.
Clifford Chance U.S. LLP
31 West 52nd Street
New York, New York 10019
Boston, MA 02116    
Registrant’s telephone number, including area code: (888) 246-2255
Date of fiscal year end: October 31
Date of reporting period: July 31, 2009
 
 

 

TABLE OF CONTENTS

Item 1. Schedule of Investments
Item 2. Controls and Procedures
Item 3. Exhibits
SIGNATURES
Certifications

Table of Contents

Item 1. Schedule of Investments.

 

Table of Contents

THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS
July 31, 2009 (Unaudited)
                             
Name of Issuer and Title of Issue   Shares           Value (Note A)  
COMMON STOCK AND OTHER EQUITY INTERESTS
                      
 
                      
CHINA
                      
Financials — (0.9%)
                      
Ping An Insurance Group Co. of China Ltd. (1)
     614,500           $ 5,435,281  
 
                    
TOTAL CHINA— (Cost $2,947,647)
       0.9 %     5,435,281  
 
             
 
                      
HONG KONG
                      
Consumer Discretionary — (6.1%)
                      
FU JI Food & Catering Services (1)
     5,462,000             5,356,215  
Intime Department Store Group Co., Ltd.
     12,568,629             7,703,254  
Ports Design, Ltd. (1)
     4,549,500             11,728,753  
Shangri-La Asia, Ltd. (1)
     4,755,555             7,547,429  
Yorkey Optical International Cayman, Ltd. #
     8,598,926             2,108,096  
 
                    
 
                   34,443,747  
 
                    
Consumer Staples — (1.8%)
                      
Chaoda Modern Agriculture (Holdings), Ltd. (1)
     14,885,357             10,160,326  
 
                    
Energy — (2.3%)
                      
China Rare Earth Holdings, Ltd. (1)
     11,070,000             2,199,688  
Fushan International Energy Group, Ltd. * (1)
     16,044,000             10,578,552  
 
                    
 
                   12,778,240  
 
                    
Health Care — (4.6%)
                      
China Shineway Pharmaceutical Group, Ltd. #
     11,184,000             10,895,240  
Golden Meditech Co., Ltd. * (1)
     35,040,000             6,600,999  
Natural Beauty Bio-Technology, Ltd. #
     48,680,000             8,291,196  
 
                    
 
                   25,787,435  
 
                    
Industrials — (0.8%)
                      
TPV Technology, Ltd. (1)
     8,854,000             4,821,084  
 
                    
Information Technology — (0.9%)
                      
Sina Corp. *
     162,700             5,398,386  
 
                    
Utilities — (1.5%)
                      
Xinao Gas Holdings, Ltd.
     5,084,000             8,436,051  
 
                    
TOTAL HONG KONG — (Cost $63,159,761)
       18.0 %     101,825,269  
 
             
 
                    
HONG KONG — “H” SHARES
                      
Consumer Staples — (3.8%)
                      
Wumart Stores, Inc. #
     14,888,000             21,630,544  
 
                    
Health Care — (4.9%)
                      
China Pharmaceutical Group Ltd
     12,918,000             7,350,664  
See notes to Schedule of Investments.

1

Table of Contents

THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (continued)
July 31, 2009 (Unaudited)
                     
Name of Issuer and Title of Issue   Shares         Value (Note A)  
COMMON STOCK AND OTHER EQUITY INTERESTS (continued)
                    
 
                    
HONG KONG — “H” SHARES (continued)
                    
Shandong Weigao Group Medical Polymer Co., Ltd. (1)
     7,808,000         $ 20,451,659  
 
                  
 
                 27,802,323  
 
                  
Materials — (1.2%)
                    
Zijin Mining Group Co., Ltd.
     7,214,000           6,757,802  
 
                  
Telecommunications — (1.2%)
                    
ZTE Corp. (1)
     1,461,926           6,404,096  
 
                  
TOTAL HONG KONG — “H” SHARES —
(Cost $40,130,551)
     11.1 %     62,594,765  
 
                
TOTAL HONG KONG (INCLUDING “H” SHARES) —
(Cost $103,290,312)
     29.1 %     164,420,034  
 
                
 
                    
SINGAPORE
                    
Consumer Staples — (3.9%)
                    
China Fishery Group, Ltd. #
     13,255,000           10,774,551  
China Milk Products Group, Ltd.
     4,923,000           1,744,350  
Hsu Fu Chi International, Ltd. #
     9,484,000           9,422,392  
 
                  
 
                 21,941,293  
 
                  
Financials — (0.4%)
                    
Financial One Corp. * #
     12,030,000           2,465,592  
 
                  
Information Technology — (0.4%)
                    
CDW Holding, Ltd. # †
     59,708,000           2,488,957  
 
                  
TOTAL SINGAPORE — (Cost $24,543,498)
     4.7 %     26,895,842  
 
                
 
                    
TAIWAN
                    
Consumer Discretionary — (6.1%)
                    
FamilyMart Co., Ltd. #
     4,260,652           7,298,483  
Far Eastern Department Stores, Ltd. *
     18,511,584           18,676,342  
Merry Electronics Co., Ltd.
     3,584,340           3,605,317  
Synnex Technology International Corp. *
     2,553,855           4,958,564  
 
                  
 
                 34,538,706  
 
                  
Consumer Staples — (3.0%)
                    
Lien Hwa Industrial Corp.
     15,919,692           7,715,286  
Uni-President Enterprises Corp.
     8,728,581           9,059,016  
 
                  
 
                 16,774,302  
 
                  
See notes to Schedule of Investments.

2

Table of Contents

THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (continued)
July 31, 2009 (Unaudited)
                     
Name of Issuer and Title of Issue   Shares         Value (Note A)  
COMMON STOCK AND OTHER EQUITY INTERESTS (continued)
                    
 
                    
TAIWAN (continued)
                    
Financials — (4.1%)
                    
KGI Securities Co. Ltd. 144A
     8,800,000         $ 4,372,105  
Ruentex Development Co., Ltd. *
     12,694,000           11,549,497  
Yuanta Financial Holdings Co., Ltd. *
     10,520,593           7,567,849  
 
                  
 
                 23,489,451  
 
                  
Information Technology — (3.7%)
                    
HTC Corp. *
     438,000           5,974,305  
Taiwan Secom Co., Ltd. #
     4,738,000           7,148,592  
WPG Holdings Co Ltd
     6,320,000           7,763,228  
 
                  
 
                 20,886,125  
 
                  
Materials — (1.6%)
                    
China Metal Products Co., Ltd.
     9,019,881           8,866,470  
 
                  
TOTAL TAIWAN — (Cost $77,105,994)
     18.5 %     104,555,054  
 
                
 
                    
UNITED KINGDOM
                    
Health Care — (2.5%)
                    
China Medical System Holdings, Ltd. # †
     3,623,188           13,926,256  
 
                  
TOTAL UNITED KINGDOM — (Cost $9,940,990)
     2.5 %     13,926,256  
 
                
 
                    
UNITED STATES
                    
Consumer Discretionary — (1.5%)
                    
New Oriental Education & Technology Group, ADR * (1)
     73,400           5,394,900  
The9, Ltd., ADR # (1)
     358,900           3,133,197  
 
                  
 
                 8,528,097  
 
                  
Energy — (1.0%)
                    
Far East Energy Corp. * # †
     14,565,477           5,534,881  
 
                  
Health Care — (2.6%)
                    
Mindray Medical International, Ltd., ADR (1)
     191,700           5,697,324  
WuXi PharmaTech Cayman, Inc., ADR * #
     836,890           8,954,723  
 
                  
 
                 14,652,047  
 
                  
TOTAL UNITED STATES
      — (Cost $36,894,139)
     5.1 %     28,715,025  
 
                
TOTAL COMMON STOCK AND OTHER EQUITY INTERESTS — (Cost $254,722,580)
     60.8 %     343,947,492  
 
                
See notes to Schedule of Investments.

3

Table of Contents

THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (continued)
July 31, 2009 (Unaudited)
                     
Name of Issuer and Title of Issue   Shares         Value (Note A)  
EQUITY LINKED SECURITIES
                    
Consumer Staples — (4.5%)
                    
Dalian Zhangzidao Fishery Group Co., Ltd. Access Product (expiration 01/17/12)
144A * (3)
     1,100,565         $ 4,210,762  
Shenzhen Agricultural Products Co., Ltd. Access Product (expiration 01/17/12)
144A * (3)
     6,800,000           11,376,298  
Wuliangye Yibin Co., Ltd. Access Product (expiration 01/20/10) 144A * (3)
     2,857,007           9,836,675  
 
                  
 
                 25,423,735  
 
                  
 
                    
Energy — (1.7%)
                    
China Yangtze Power Co., Ltd. Access Product (expiration 10/26/10) 144A (2) (4)
     4,169,077           9,604,845  
 
                  
Financials — (8.1%)
                    
China Minsheng Banking Co. Ltd. Access Product (expiration 04/19/12) 144A (4)
     758,300           965,620  
China Minsheng Banking Co., Ltd. Access Product (expiration 01/21/10) 144A (3)
     4,000,000           5,093,604  
Citic Securities Co., Ltd. China (expiration 01/20/10) 144A * (3)
     1,416,200           7,883,094  
Citic Securities Co., Ltd. China (expiration 09/23/13) 144A * (4)
     3,304,000           18,391,290  
Financial Products, Ltd. (expiration 03/26/14) 144A (4)
     238,502,000           6,325,517  
Zhejiang Guyuelongshan Access Product (expiration 10/07/13) 144A (4)
     6,124,000           7,394,944  
 
                  
 
                 46,054,069  
 
                  
Industrials — (3.1%)
                    
Daqin Railway Co., Ltd. Access Product (expiration 11/02/11) 144A * (4)
     3,807,000           6,285,471  
Shanghai International Airport Co., Ltd. Access Product (expiration 01/20/10)
144A * (3)
     1,816,700           4,627,135  
Suning Appliance Co., Ltd. Access Product (expiration 01/20/10) 144A * (3)
     2,874,013           6,506,765  
 
                  
 
                 17,419,371  
 
                  
TOTAL EQUITY LINKED SECURITIES — (Cost $69,028,766)
         17.4 %     98,502,020  
 
                
 
                    
DIRECT INVESTMENTS
                    
 
                    
Consumer Discretionary — (7.2%)
                    
Queenbury Investments, Ltd., (Huiyan) (acquired 05/06/08) * # † (2) (5)
     450           40,655,250  
 
                  
Industrials — (2.7%)
                    
Highlight Tech Corp., (acquired 09/11/07) * # † (2) (5) (6)
     3,366,893           6,902,130  
See notes to Schedule of Investments.

4

Table of Contents

THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (continued)
July 31, 2009 (Unaudited)
                                                            
Name of Issuer and Title of Issue   Shares                       Value (Note A)  
DIRECT INVESTMENTS (continued)
                                  
 
                                  
INDUSTRIALS (continued)
                                  
Qingdao Bright Moon, (acquired 02/28/08) * # † (2) (5) (6)
     31,827,172                       $ 8,275,065  
 
                                
 
                               15,177,195  
 
                                
Information Technology — (2.1%)
                                  
China Silicon Corp. Common Stock, (acquired 09/23/08) * # † (2) (5)
     347,904                         —  
China Silicon Corp. Warrants (expiration 11/30/10), (acquired 11/30/07) * # † (2) (5)
     685,450                         —  
China Silicon Corp., Series A Preferred (acquired 11/30/07) # † (2) (5)
     27,418                         3,646,594  
HAND Enterprise Solutions, Ltd., (acquired 05/02/07) * # † (2) (5)
     500,000                         8,200,000  
teco Optronics Corp., (acquired 04/26/04) * # (2) (5)
     1,861,710                         —  
 
                                
 
                               11,846,594  
 
                                
                         
    Face                
    Amount                
Industrials — (4.0%)
                        
Ugent Holdings, Ltd., 12.0% 06/04/12 (acquired 04/06/09) * # † (2) (5)
     177,000,000               22,838,415  
 
                        
TOTAL DIRECT INVESTMENTS — (Cost $85,608,995)
             16.0 %     90,517,454  
 
                        
                         
    Shares                
COLLATERAL FOR SECURITIES ON LOAN — (5.5%)
                        
State Street Navigator Prime Portfolio
     30,804,783               30,804,783  
 
                        
TOTAL COLLATERAL FOR SECURITIES ON LOAN — (Cost $30,804,783)
             5.5 %     30,804,783  
 
                        
 
                        
SHORT TERM INVESTMENTS — (4.5%)
                        
 
                        
UNITED STATES
                        
Repurchase Agreement with State Street Bank and Trust, 0.23%, 08/03/09 (7)
     25,353,000               25,353,000  
 
                        
TOTAL UNITED STATES — (Cost $25,353,000)
             4.5 %     25,353,000  
 
                        
TOTAL INVESTMENTS — (Cost $465,518,124)**
             104.2 %     589,124,749  
 
                        
OTHER ASSETS AND LIABILITIES
             (4.2 )%     (23,823,937 )
 
                        
 
                        
NET ASSETS
             100.0 %   $ 565,300,812  
Notes to Schedule of Investments
See notes to Schedule of Investments.

5

Table of Contents

THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (continued)
July 31, 2009 (Unaudited)
 
(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. Forward currency contracts are valued at the current cost of offsetting the contract.
 
    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 (see Note B).
 
(1)   A portion or all of the security was held on loan. As of July 31, 2009, the market value of the securities loaned was $29,571,451.
 
(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.
 
(6)   The Fund holds a put option which allows the Fund to sell the investment for a value at least equal to the purchase price under certain circumstances.
 
(7)   Repurchase agreement, dated 07/31/09, due 08/03/09 with repurchase proceeds of $25,353,021 is collateralized by US Treasury Bill 0.23% due 01/14/10 with a market value of $25,861,521.
 
144A   securities. Securities restricted for resale to Qualified Institutional Buyers.
 
ADR   American Depositary Receipts.
 
**   At July 31, 2009, the cost of investment securities for tax purposes was $465,518,124. Net unrealized appreciation of investment securities for tax purposes was $123,606,625, consisting of unrealized gains of $147,922,587 on securities that had risen in value since their purchase and $24,315,962 in unrealized losses on securities that had fallen in value since their purchase.
See notes to Schedule of Investments.

6

Table of Contents

THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (continued)
July 31, 2009 (Unaudited)
Forward Foreign Currency Contracts:
As of July 31, 2009, the Fund had the following open forward foreign currency contracts:
                                     
                                Unrealized
    Settlement                           Appreciation/
Currency   Date   Local Amount   Base Amount   Market Value   (Depreciation)
 
CNY (Sell)
  11/30/2009     122,079,803     $ 17,382,150     $ 17,897,480     $ (515,330 )
CNY (Buy)
  11/30/2009     122,079,803       17,540,202       17,897,480       357,278  
TWD (Sell)
  11/30/2009     572,709,241       17,382,150       17,629,865       (247,715 )
TWD (Buy)
  11/30/2009     572,709,241       18,055,146       17,629,865       (425,281 )
 
                                   
 
                                    
 
                              $ (831,048 )
 
                                   
 
CNY   — Chinese Yen
 
TWD   — Taiwan Dollar
FAS 161 — Disclosures About Derivative Instruments and Hedging Activities
In March 2008, Statement of Financial Accounting Standards 161, “Disclosures about Derivative Instruments and Heding Activities” (“SFAS 161”) was issued and is effective for fiscal years beginning after November 15, 2008. SFAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity’s results of operations and financial position.
                 
    Foreign    
Derivatives not accounted for as hedging instruments under   Exchange    
Statement 133   Contracts Risk   Total
Asset Derivatives
                
Forward Contracts
   $ 357,278     $ 357,278  
 
                
Liability Derivatives
                
Forward Contracts
     1,188,326       1,188,326  
FAS 157 — Summary of Fair Value Disclosure
See notes to Schedule of Investments.

7

Table of Contents

THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (continued)
July 31, 2009 (Unaudited)
The Fund adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”), effective November 1, 2008. In accordance with FAS 157, fair value is defined as the price that the Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. FAS 157 established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
•   Level 1 — quoted prices in active markets for identical investments
 
•   Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
 
•   Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)
The valuation techniques used by the Fund to measure fair value during the nine months ended July 31, 2009 maximized the use of observable inputs and minimized the use of unobservable inputs. The Fund utilized the following fair value techniques: a multi-dimensional relational pricing model, option adjusted spread pricing and estimations of the price that would have prevailed in a liquid market for an international equity given information available at the time of evaluation.
The following is a summary of the inputs used as of July 31, 2009 in valuing the Fund’s investments carried at value:
See notes to Schedule of Investments.

8

Table of Contents

THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (continued)
July 31, 2009 (Unaudited)
ASSETS VALUATION INPUT
                                 
Description   Level 1   Level 2   Level 3   Total
 
COMMON STOCK AND OTHER EQUITY INTERESTS
                                
China
                                
Financials
   $ 5,435,281     $ —     $ —     $ 5,435,281  
Hong Kong
                                
Consumer Discretionary
     34,443,747       —       —       34,443,747  
Consumer Staples
     10,160,326       —       —       10,160,326  
Energy
     12,778,240       —       —       12,778,240  
Health Care
     25,787,435       —       —       25,787,435  
Industrials
     4,821,084       —       —       4,821,084  
Information Technology
     5,398,386       —       —       5,398,386  
Utilities
     8,436,051       —       —       8,436,051  
 
Total Hong Kong
     101,825,269       —       —       101,825,269  
 
HONG KONG — “H” SHARES
                                
Consumer Staples
     21,630,544       —       —       21,630,544  
Health Care
     27,802,323       —       —       27,802,323  
Materials
     6,757,802       —       —       6,757,802  
Telecommunications
     6,404,096       —       —       6,404,096  
 
Total HONG KONG — “H” SHARES
     62,594,765       —       —       62,594,765  
 
Singapore
                                
Consumer Staples
     21,941,293       —       —       21,941,293  
Financials
     2,465,592       —       —       2,465,592  
Information Technology
     2,488,957       —       —       2,488,957  
 
Total Singapore
     26,895,842       —       —       26,895,842  
 
Taiwan
                                
Consumer Discretionary
     34,538,706       —       —       34,538,706  
Consumer Staples
     16,774,302       —       —       16,774,302  
Financials
     23,489,451       —       —       23,489,451  
Information Technology
     20,886,125       —       —       20,886,125  
Materials
     8,866,470       —       —       8,866,470  
 
Total Taiwan
     104,555,054       —       —       104,555,054  
 
United Kingdom
                                
Health Care
     13,926,256       —       —       13,926,256  
 
Total United Kingdom
     13,926,256       —       —       13,926,256  
 
UNITED STATES
                                
Consumer Discretionary
     8,528,097       —       —       8,528,097  
Energy
     5,534,881       —       —       5,534,881  
Health Care
     14,652,047       —       —       14,652,047  
 
TOTAL UNITED STATES
     28,715,025       —       —       28,715,025  
 
Total COMMON STOCK AND OTHER EQUITY INTERESTS
     343,947,492       —       —       343,947,492  
 
EQUITY LINKED SECURITIES
                                
Consumer Staples
     25,423,735       —       —       25,423,735  
Energy
     —       —       9,604,845       9,604,845  
Financials
     46,054,069       —       —       46,054,069  
Industrials
     17,419,371       —       —       17,419,371  
 
TOTAL EQUITY LINKED SECURITIES
     88,897,175       —       9,604,845       98,502,020  
 
DIRECT INVESTMENTS
                                
Consumer Discretionary
     —       —       40,655,250       40,655,250  
See notes to Schedule of Investments.

9

Table of Contents

THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (continued)
July 31, 2009 (Unaudited)
                                 
Description   Level 1   Level 2   Level 3   Total
 
Industrials
     —       —       38,015,610       38,015,610  
Information Technology
     —       —       11,846,594       11,846,594  
 
TOTAL DIRECT INVESTMENTS
     —       —       90,517,454       90,517,454  
 
COLLATERAL FOR SECURITIES ON LOAN
     —       30,804,783       —       30,804,783  
SHORT TERM INVESTMENTS
                                
UNITED STATES
     —       25,353,000       —       25,353,000  
FORWARD FOREIGN CURRENCY CONTRACTS
     357,278       —       —       357,278  
 
TOTAL INVESTMENTS
     433,201,945       56,157,783       100,122,299       589,482,027  
 
Total
   $ 433,201,945     $ 56,157,783     $ 100,122,299     $ 589,482,027  
 
LIABILITIES
                                
 
FORWARD FOREIGN CURRENCY CONTRACTS
     (1,188,326 )     —       —       (1,188,326 )
 
The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund during the period ending July 31, 2009:
                                                                 
                                                            Change in
                                                            Unrealized
                                                            Appreciation
                                            Net           (Depreciation)
                                    Change in   Transfers           from
    Balance as   Net   Accrued   Realized   Unrealized   in and/or   Balance as   Investments
    of October   Purchases   Discounts   Gain   Appreciation   out of   of July 31,   Held at July
Investments in Securities   31, 2008   (Sales)   (Premiums)   (Loss)   (Depreciation)   Level 3   2009   31, 2009
 
COMMON STOCK AND OTHER EQUITY INTERESTS
                                                                
Materials
   $ 155,259       ($156,497 )   $ —       ($31,412 )   $ 32,650     $ —     $ —     $ 32,650  
                   
DIRECT INVESTMENTS
                                                                
Consumer Discretionary
     38,459,700       —       —       —       2,195,550       —       40,655,250       2,195,550  
Industrials
     16,675,038       18,705,865       —       388,218       2,246,489       —       38,015,610       2,246,489  
Information Technology
     10,011,966       391,529       —       —       1,443,099       —       11,846,594       1,443,099  
                   
 
     65,146,704       19,097,394       —       388,218       5,885,138       —       90,517,454       5,885,138  
                   
 
                                                                
EQUITY LINKED SECURITIES
                                                                
Energy
     3,888,986       —       —       —       5,715,859       —       9,604,845       5,715,859  
                   
 
   $ 69,190,949     $ 18,940,897     $ —     $ 356,806     $ 11,633,647     $ —     $ 100,122,299     $ 11,633,647  
                   
Direct investments: The Fund may invest up to 25% of the net proceeds from its offering of its outstanding common stock in direct investments. Direct investments are generally restricted and do not have a readily available resale market. The value of these securities at July 31, 2009 was $90,517,454 or
See notes to Schedule of Investments.

10

Table of Contents

THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (continued)
July 31, 2009 (Unaudited)
16.0% of the Fund’s net asset value. The table below details the acquisition date, cost, and value of the Fund’s direct investments as determined by the Board of Director’s of the Fund. The Fund does not have the right to demand that such securities be registered.
                         
    Acquisition              
Security   Date     Cost     Value  
China Silicon Corp., Series A Preferred*
     11/30/2007     $ 6,552,874     $ 3,646,594  
China Silicon Corp. Common Stock
     09/23/2008       828,011       —  
HAND Enterprise Solutions, Ltd.
     05/02/2007       3,164,274       8,200,000  
Highlight Tech. Corp
     09/11/2007       6,025,894       6,902,130  
Qingdao Bright Moon
     02/28/2008       7,116,942       8,275,065  
Queenbury Investments, Ltd., (Huiyan)
     05/06/2008       38,515,190       40,655,250  
Ugent Holdings, Ltd
     09/17/2007       22,838,490       22,838,415  
teco Optronics Corp
     04/26/2004       567,320       —  
 
                    
 
           $ 85,608,995     $ 90,517,454  
 
                    
 
*   The purchase of China Silicon Corp., Series A Preferred resulted in the Fund receiving 682,450 shares of China Silicon Corp. common stock warrants. Each warrant entitles the Fund to purchase twenty five shares of common stock at an exercise price of USD$2.98 per share, subject to adjustment.
NOTE B — Investments in Non-Controlled Affiliates*:
                                         
    Balance of                    
    Shares   Gross           Balance of    
    Held   Purchases   Gross   Shares    
    October   and   Sales and   Held July   Value July
Name of Issuer   31, 2008   Additions   Reductions   31, 2009   31, 2009
 
CDW Holdings, Ltd.
     60,000,000       —       292,000       59,708,000     $ 2,488,957  
China Medical System Holdings, Ltd.
     3,623,188       —       —       3,623,188       13,926,256  
See notes to Schedule of Investments.

11

Table of Contents

THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (continued)
July 31, 2009 (Unaudited)
                                         
    Balance of                    
    Shares   Gross           Balance of    
    Held   Purchases   Gross   Shares    
    October   and   Sales and   Held July   Value July
Name of Issuer   31, 2008   Additions   Reductions   31, 2009   31, 2009
 
China Silicon Corp. Common Stock
     183,396       191,508       —       374,904       —  
China Silicon Corp. Series A Preferred
     27,418       —       —       27,418       3,646,594  
China Silicon Corp. Warrants
     685,450       —       —       685,450       —  
Far East Energy Corp.
     10,478,634       4,086,843       —       14,565,477       5,534,881  
HAND Enterprise Solutions, Ltd.
     500,000       —       —       500,000       8,200,000  
Highlight Tech Corp.
     3,366,893       —       —       3,366,893       6,902,130  
Qingdao Bright Moon
     31,827,172       —       —       31,827,172       8,275,065  
Queensbury Investments, Ltd. (Huiyan)
     450       —       —       450       40,655,250  
Ugent Holdings, Ltd.
     —       177,000,000       —       177,000,000       22,838,415  
teco Optronics Corp.**
     1,861,710       —       —       1,861,710       —  
Wuxi PAIHO**
     11,734,701       —       11,734,701       —       —  
 
*   Affiliated issuers, as defined in the 1940 Act as amended, include issuers in which the Fund held 5% or more of the outstanding voting securities.
 
**   Securities are no longer considered affiliated as of July 31, 2009.
See notes to Schedule of Investments.

12

Table of Contents

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(a) of the 1940 Act (17 CFR 270.30a-2(a)) is attached as an exhibit to this filing.

 

Table of Contents

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:
    
 
   Jamie Skinner
 
  President and Chief Executive Officer
 
    
Date:
   9/29/09
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:
    
 
   Jamie Skinner
 
  President and Chief Executive Officer
 
    
Date:
   9/29/09
 
    
By:
    
 
  Laura F. Healy
 
  Treasurer
 
    
Date:
   9/29/09