CHINA FUND INC, DEFA14A, 1996-02-20

CHINA FUND INC
DEFA14A, 1996-02-20

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<PAGE>

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_]Preliminary Proxy Statement

[_]Confidential, for Use of the
Commission Only (as Permitted by
Rule 14a-6(e)(2))

[X]Definitive Proxy Statement

[X]Definitive Additional Materials

[_]Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12

The China Fund, Inc.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)

-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X]$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.

[_]$500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).

[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange ActRule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[_]Fee paid previously with preliminary materials.

[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

Notes:
<PAGE>

THE CHINA FUND, INC.

c/o HSBC Securities, Inc.
250 Park Avenue
New York, New York 10177
(212) 808-0500
(800) 421-4777

February 20, 1996

Dear Stockholders:

The Annual Meeting of Stockholders of The China Fund, Inc. (the "Fund") will
be held at 11:00 A.M. on Friday, March 15, 1996, at the offices of Rogers &
Wells, 200 Park Avenue, 50th Floor, New York, New York 10166. A Notice and
Proxy Statement regarding the meeting, proxy card for your vote at the meeting,
and postage prepaid envelope in which to return your proxy are enclosed.

At the Annual Meeting, the stockholders will (i) elect a class of the Fund's
directors and (ii) consider the ratification of the selection of KPMG Peat
Marwick L.L.P. as independent auditors. In addition, the stockholders present
at the Annual Meeting will hear a report on the Fund and will have an
opportunity to discuss matters of interest to them.

The Board has recommended that the stockholders vote in favor of each of the
foregoing matters.

Respectfully,

/s/ Thomas R. Callahan

Thomas R. Callahan
Secretary

STOCKHOLDERS ARE URGED TO SIGN AND MAIL THE ENCLOSED PROXY IN THE ENCLOSED
ENVELOPE TO INSURE A QUORUM AT THE MEETING.
<PAGE>

THE CHINA FUND, INC.

NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS

MARCH 15, 1996

To the Stockholders of
The China Fund, Inc.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of The China
Fund, Inc. (the "Fund") will be held at the offices of Rogers & Wells, 200
Park Avenue, 50th Floor, New York, New York 10166, on Friday, March 15, 1996,
at 11:00 A.M., New York time, for the following purposes:

1. To elect three Class III directors to serve for a term expiring on the
date on which the annual meeting of stockholders is held in 1999.

2. To ratify or reject the selection of KPMG Peat Marwick L.L.P. as
independent auditors of the Fund for its fiscal year ending October 31,
1996.

3. To transact such other business as may properly come before the meeting
or any adjournments thereof.

The Board of Directors has fixed the close of business on January 30, 1996
as the record date for the determination of stockholders entitled to notice of
and to vote at the meeting or any adjournments thereof.

You are cordially invited to attend the meeting. Stockholders who do not
expect to attend the meeting in person are requested to complete, date and
sign the enclosed form of proxy and return it promptly in the envelope
provided for that purpose. You may nevertheless vote in person at the meeting
if you choose to attend. The enclosed proxy is being solicited by the Board of
Directors of the Fund.

By order of the Board of Directors,

Thomas R. Callahan
Secretary

February 20, 1996
<PAGE>

THE CHINA FUND, INC.
C/O HSBC SECURITIES, INC.
250 PARK AVENUE
NEW YORK, NEW YORK 10177

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PROXY STATEMENT

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

INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of THE CHINA FUND, INC. (the "Fund") for use
at the Annual Meeting of Stockholders, to be held at the offices of Rogers &
Wells, 200 Park Avenue, 50th Floor, New York, New York 10166, on Friday, March
15, 1996, at 11:00 A.M., New York time, and at any adjournments thereof.

This Proxy Statement and the form of proxy are being mailed to stockholders
on or about February 20, 1996. Any stockholder giving a proxy has the power to
revoke it by mail (addressed to the Secretary, The China Fund, Inc., c/o HSBC
Securities, Inc., 250 Park Avenue, New York, New York 10177) or in person at
the meeting, by executing a superseding proxy or by submitting a notice of
revocation to the Fund. All properly executed proxies received in time for the
meeting will be voted as specified in the proxy or, if no specification is
made, for each proposal referred to in this Proxy Statement. Abstentions and
broker non-votes are each included in the determination of the number of
shares present and voting at the meeting.

The Board of Directors has fixed the close of business on January 30, 1996
as the record date for the determination of stockholders entitled to notice of
and to vote at the meeting and at any adjournments thereof. Stockholders on
the record date will be entitled to one vote for each share held, with no
shares having cumulative voting rights. As of the record date, the Fund had
outstanding 10,844,937 shares of common stock. To the knowledge of the Fund's
management, no person owned beneficially more than 5% of the Fund's
outstanding shares as of January 30, 1996.

Management of the Fund knows of no business other than that mentioned in
Items 1 and 2 of the Notice of Meeting which will be presented for
consideration at the meeting. If any other matter is properly presented, it is
the intention of the persons named in the enclosed proxy to vote in accordance
with their best judgment.

THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT FOR ITS
FISCAL YEAR ENDED OCTOBER 31, 1995 TO ANY STOCKHOLDER REQUESTING SUCH REPORT.
REQUESTS FOR THE ANNUAL REPORT SHOULD BE MADE BY WRITING TO THE CHINA FUND,
INC., C/O OPPENHEIMER & CO., INC., WORLD FINANCIAL CENTER, NEW YORK, NEW YORK
10281, ATTENTION: MR. CHARLES DEMARCO, OR BY CALLING 1-800-421-4777.

The Board recommends that the stockholders vote in favor of each of the
matters mentioned in Items 1 and 2 of the Notice of Meeting.

(1) ELECTION OF DIRECTORS

Persons named in the accompanying form of proxy intend in the absence of
contrary instructions to vote all proxies for the election of Mr. Joe O.
Rogers, Mr. Alan Tremain and Mr. Nigel S. Tulloch as Class III directors of
the Fund, to serve for a term expiring on the date on which the Annual Meeting
of Stockholders is held in 1999, or until their successors are elected and
qualified. If any such nominee should be unable to serve, an event not now
anticipated, the proxies will be voted for such person, if any, as shall be
designated by the Board of Directors to replace any such nominee. The election
of each director will require the affirmative vote of a majority of the votes
cast at the meeting. For this purpose, abstentions and broker non-votes will
not be counted as votes cast at the meeting.
<PAGE>

INFORMATION CONCERNING NOMINEES AND MEMBERS OF THE BOARD OF DIRECTORS

The following table sets forth information concerning each of the nominees
as a director of the Fund. Each of the nominees is now a director of the Fund.

NOMINEES

OTHER CURRENT DIRECTORS

2
<PAGE>

OTHER CURRENT DIRECTORS (CONTINUED)

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR SHARES
EMPLOYMENT DURING PAST BENEFICIALLY
FIVE YEARS AND OWNED
NAME (AGE) AND DIRECTORSHIPS IN DIRECTOR JANUARY 30, PERCENT OF
ADDRESS OF DIRECTOR PUBLICLY HELD COMPANIES SINCE 1996 (1) CLASS
- ------------------------ -------------------------------------- -------- ------------ ----------
<S> <C> <C> <C> <C>
Michael F. Holland (51) Chairman, Holland & Company L.L.C.; 1992 1,000 less than
375 Park Avenue General Partner, The Blackstone Group 1%
New York, New York (1994-1995); Vice Chairman,
10152 Oppenheimer & Co., Inc. (1992-1994);
Chairman and Chief Executive Officer,
Salomon Brothers Asset Management,
Inc (1989-1992); Managing Director,
Salomon Brothers Inc (1989-1992);
Director, The Holland Balanced Fund,
Inc.; Director, Municipal Partner's
Fund, Inc.; Director, Municipal
Partners Fund II, Inc.; Director,
Municipal Advantage Fund, Inc.
Burton Levin (65) Visiting Professor Carleton College 1992 None --
c/o Political Science (1995-present); Director, Yaohan Food
Dept. (1993-present); Director, The Asia
Carleton College Society (1990-1995).
Northfield, MN 55057
James J. Lightburn (52) Attorney, member of Hughes Hubbard & 1992 500 less than
47, Avenue Georges Reed (1993-present); member of Jones, 1%
Mandel Day, Reavis & Pogue (1986-1993).
Paris, France
75116
*David F.J. Paterson Managing Director, HSBC Private Equity 1992 1,000 less than
(51) Management Hong Kong Limited 1%
10/F Citibank Tower (1992-present); Managing Director,
3 Garden Road HSBC Private Equity Management
Hong Kong Limited (1989-present); Director, The
HSBC China Fund Limited; Adviser,
Wardley China Investment Trust (1993-
present).
</TABLE>
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(1) The information as to beneficial ownership is based on statements furnished
to the Fund by the nominees and other current directors.
* Directors considered to be "interested persons" (as defined in the
Investment Company Act of 1940) of the Fund or of the Fund's investment
advisers. Mr. Paterson is an interested person because of his affiliation
with HSBC Private Equity Management Hong Kong Limited, the Fund's Direct
Investment Manager. Mr. Tulloch is an interested person because he currently
owns 5,266 ordinary shares of HSBC Holdings plc, the parent company of the
Fund's Investment Manager and Direct Investment Manager, which shares are
held in a portfolio under the discretionary management of HSBC Asset
Management Bahamas Limited.

3
<PAGE>

Ian C. Ferguson, director and president of the Fund since June 1993,
resigned as a director of the Fund effective February 8, 1996. It is
anticipated that the Board of Directors will elect a replacement to serve the
remainder of Mr. Ferguson's term as a Class I Director at the next meeting of
the Board.

The Fund's Board of Directors has an Audit Committee which is responsible
for reviewing financial and accounting matters. The current members of the
Audit Committee are Messrs. Donald, English, Holland, Levin, Lightburn, Rogers
and Tremain. The Audit Committee met four times during the fiscal year ended
October 31, 1995. The Fund's Board has a Nominating Committee which is
responsible for nominating candidates to fill any vacancies on the Board. The
Nominating Committee does not consider nominees recommended by security
holders. The Nominating Committee did not meet during the fiscal year ended
October 31, 1995. The Fund's Board of Directors held four regular meetings and
one special meeting during the fiscal year ended October 31, 1995. Each
director, except Mr. Lightburn, attended at least seventy-five percent of the
aggregate number of meetings of the Board and any committee on which he
served.

Section 16(a) of the Securities Exchange Act of 1934 requires the Fund's
officers and directors, and persons who own more than ten percent of a
registered class of the Fund's equity securities, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission and the
New York Stock Exchange, Inc. The Fund believes that its officers and
directors have complied with all applicable filing requirements for the fiscal
year ended October 31, 1995, except that the Form 4--Statement of Changes in
Beneficial Ownership for Mr. Rogers relating to one transaction of the Fund's
shares, was inadvertently filed late by management of the Fund, which had
undertaken to file the form on his behalf. Section 30(f) of the Investment
Company Act of 1940 extends the reporting requirements under Section 16(a) of
the Securities Exchange Act of 1934 to the investment advisers of the Fund and
officers and directors of such investment advisers. The Fund believes that its
investment advisers and the officers and directors of such investment advisers
have complied with all applicable filing requirements for the fiscal year
ended October 31, 1995, except that the Form 3--Initial Statements of
Beneficial Ownership of Securities for Mr. Alan Sui-Kwong Ho, Ms. Brenda Yen,
Mr. Herman Poon, Mr. Michael Roche and Mr. Mark Newman, were inadvertently
filed late by management of the Fund, which had undertaken to file the forms
on their behalf.

OFFICERS OF THE FUND

Mr. Thomas R. Callahan (age 49) has been Secretary and Treasurer of the Fund
since July 1992 and Vice President of the Fund since June 1993. Since April
1991, he has been a Managing Director of HSBC Securities, Inc. (formerly James
Capel Incorporated) and previously was a Managing Director of Wardley
Incorporated.

FUND MANAGEMENT AND ADMINISTRATION

HSBC Asset Management Hong Kong Limited acts as Investment Manager for the
portion of the Fund's assets allocated to be invested in listed securities
pursuant to an Investment Advisory and Management Agreement between the
Investment Manager and the Fund. The principal business address of the
Investment Manager is 10/F Citibank Tower, 3 Garden Road, Hong Kong.

HSBC Private Equity Management Hong Kong Limited acts as Direct Investment
Manager for the portion of the Fund's assets allocated to be invested in
direct investments pursuant to a Direct Investment Management Agreement among
the Direct Investment Manager, the Investment Manager and the Fund. The
principal business address of the Direct Investment Manager is 10/F Citibank
Tower, 3 Garden Road, Hong Kong.

State Street Bank and Trust Company acts as Administrator to the Fund
pursuant to an Administration Agreement between the Administrator and the
Fund. The principal business address of the Administrator is P.O. Box 1713,
Boston, Massachusetts 02105.

4
<PAGE>

TRANSACTIONS WITH AND REMUNERATION OF OFFICERS AND DIRECTORS

The aggregate remuneration for directors not affiliated with the Investment
Manager or the Direct Investment Manager was US$200,002 during the year ended
October 31, 1995 and, for that period, the aggregate amount of expenses
reimbursed by the Fund for directors' attendance at directors' meetings,
including affiliated directors, was US$101,377. Each non-affiliated director
currently receives fees, paid by the Fund, of US$1,000 for each directors'
meeting and committee meeting attended and an annual fee of US$7,500.

The Direct Investment Manager pays the compensation and certain expenses of
the personnel of the Direct Investment Manager who serve as directors and
officers of the Fund and receives from the Investment Manager a portion of the
investment advisory fee paid by the Fund to the Investment Manager. Mr.
Paterson also serves as the Managing Director, and is a 25% owner, of the
Direct Investment Manager and may participate in the fees paid to that firm,
although the Fund will make no direct payments to him.

The following table sets forth the aggregate compensation from the Fund paid
to each director during the fiscal year ended October 31, 1995. The Investment
Adviser and its affiliates do not advise any other U.S. registered investment
companies of which any of the directors of the Fund are directors or trustees.

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
FROM
NAME OF DIRECTOR FUND (1)
---------------- ------------
<S> <C>
John W. English...................... $15,500
Ian C. Ferguson*+.................... --
Sir Alan Donald...................... $15,500
Michael F. Holland................... $ 7,750
Burton Levin......................... $15,500
James J. Lightburn................... $13,375
David F.J. Paterson*................. --
Joe O. Rogers........................ $15,500
Alan Tremain......................... $15,500
Nigel S. Tulloch*.................... --
</TABLE>
- --------
(1) Includes compensation paid to directors by the Fund. The Fund's directors
did not receive any pension or retirement benefits as compensation for
their service as directors of the Fund.
* Messrs. Ferguson, Paterson and Tulloch, who are "interested persons" of
the Fund, did not receive any compensation from the Fund for their
services as directors during the fiscal year ended October 31, 1995.
+Mr. Ferguson resigned as a director of the Fund effective February 8, 1996.

(2) RATIFICATION OR REJECTION OF SELECTION
OF INDEPENDENT AUDITORS

At a meeting held on December 15, 1995, the Board of Directors of the Fund,
including a majority of the directors who are not "interested persons" of the
Fund (as defined in the Investment Company Act of 1940), selected KPMG Peat
Marwick L.L.P. to act as independent auditors for the Fund for the fiscal year
ending October 31, 1996. The Fund knows of no direct financial or material
indirect financial interest of such firm in the Fund. One or more
representatives of KPMG Peat Marwick L.L.P. are expected to be present at the
meeting and will have an opportunity to make a statement if they so desire.
Such representatives are expected to be available to respond to appropriate
questions from stockholders.

5
<PAGE>

The Fund's financial statements for the fiscal year ended October 31, 1995
were examined by KPMG Peat Marwick L.L.P. In connection with its audit
services, KPMG Peat Marwick L.L.P. audited the financial statements included
in the Fund's annual report for the period ended October 31, 1995 and reviewed
the Fund's filings with the Securities and Exchange Commission.

The selection of independent auditors is subject to the ratification or
rejection of the stockholders of the Fund at the meeting. Ratification of the
selection of the independent auditors will require the affirmative vote of a
majority of the votes cast at the meeting. For this purpose, abstentions and
broker non-votes will not be counted as votes cast at the meeting.

MISCELLANEOUS

Proxies will be solicited by mail and may be solicited in person or by
telephone or telegraph by officers of the Fund or personnel of the
Administrator. The Fund has retained Corporate Investor Communications, Inc.
to assist in the proxy solicitation. The cost of their services is estimated
at US$4,500. The expenses connected with the solicitation of these proxies and
with any further proxies which may be solicited by the Fund's officers or
agents in person, by telephone or by telegraph will be borne by the Fund. The
Fund will reimburse banks, brokers, and other persons holding the Fund's
shares registered in their names or in the names of their nominees for their
expenses incurred in sending proxy material to and obtaining proxies from the
beneficial owners of such shares.

In the event that sufficient votes in favor of any proposal set forth in the
Notice of this meeting are not received by March 15, 1996, the persons named
as attorneys in the enclosed proxy may propose one or more adjournments of the
meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of the holders of a majority of the shares
present in person or by proxy at the session of the meeting to be adjourned.
The persons named as attorneys in the enclosed proxy will vote in favor of
such adjournment those proxies which they are entitled to vote in favor of the
proposal for which further solicitation of proxies is to be made. They will
vote against any such adjournment those proxies required to be voted against
such proposal. The costs of any such additional solicitation and of any
adjourned session will be borne by the Fund.

STOCKHOLDER PROPOSALS

Any proposal by a stockholder of the Fund intended to be presented at the
Annual Meeting of Stockholders of the Fund to be held in March 1997 must be
received by the Fund, c/o HSBC Securities, Inc., 250 Park Avenue, New York,
New York 10177, not later than October 23, 1996.

By order of the Board of Directors,

Thomas R. Callahan
Secretary

250 Park Avenue
New York, New York 10177
February 20, 1996

6
<PAGE>

[X] PLEASE MARK VOTES AS IN
THIS EXAMPLE
For All
For Withhold Except
1) The election of Class III directors to serve [ ] [ ] [ ]
a term expiring on the date on which the
annual meeting of stockholders is held in
1999.

MR. JOE O. ROGERS, MR. ALAN TREMAIN
AND MR. NIGEL S. TULLOCH

If you do not want your shares voted "For" a
particular nominee, mark the "For All Except"
box and strike a line through that particular
nominee's name. Your shares will be voted for
the remaining nominee(s).
For Against Abstain
2) The ratification of the selection of KPMG Peat [_] [_] [_]
Marwick LLP as independent auditors of the Fund
for its fiscal year ending October 31, 1996.

For Against Abstain
3) In the discretion of such proxies, upon such [_] [_] [_]
other business as may properly come before the
meeting or any adjournment thereof.

RECORD DATE SHARES:

Please be sure to sign and date this Proxy. Date
-------------

- ---------------------------------- ------------------------------
Stockholder sign here Co-owner sign here

Mark box at right if comments or address change have been
noted on the reverse side of this card. [_]

DETACH CARD

THE CHINA FUND, INC.

Dear Stockholder:

Please take note of the important information enclosed with this proxy card.
There are a number of issues related to the management and operation of your
Fund that require your immediate attention and approval. These are discussed in
detail in the enclosed proxy materials.

Your vote counts, and you are strongly encouraged to exercise your right to vote
your stock.

Please mark the boxes on the proxy card to indicate how your stock shall be
voted. Then sign the card, detach it and return it in the enclosed postage paid
envelope.

Your vote must be received prior to the Annual Meeting of Stockholders, which is
scheduled to be held on March 15, 1996.

Thank you in advance for your prompt consideration of these matters.

Sincerely,

The China Fund, Inc.

<PAGE>

THE CHINA FUND, INC.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

ANNUAL MEETING OF STOCKHOLDERS - MARCH 15, 1996

The undersigned stockholder of The China Fund, Inc. (the "Fund") hereby
appoints Thomas R. Callahan and Glenn Francis, or either or them, proxies of the
undersigned, with full power of substitution, to vote and act for and in the
name and stead of the undersigned at the Annual Meeting of Stockholders of the
Fund, to be held at the offices of Rogers & Wells, 200 Park Avenue, 50th Floor,
New York, New York 10166, on Friday, March 15, 1996 at 11:00 A.M., New York
time, and at any and all adjournments thereof, according to the number of votes
the undersigned would be entitled to cast if personally present.

THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
INSTRUCTIONS GIVEN BY THE STOCKHOLDERS, BUT IF NO INSTRUCTIONS ARE GIVEN, THIS
PROXY WILL BE VOTED IN FAVOR OF PROPOSALS 1 AND 2 SET FORTH IN THIS PROXY. THE
UNDERSIGNED HEREBY REVOKES ANY AND ALL PROXIES WITH RESPECT TO SUCH SHARES
HERETOFORE GIVEN BY THE UNDERSIGNED. THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE
PROXY STATEMENT DATED FEBRUARY 20, 1996.

PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE.

Please sign this proxy exactly as your name appears on the books of the Fund.
Joint owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.

HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?

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