"The Chinese have gained achievements in only 20 years whichwould take many other countries two centuries to accomplish."
--James Wolfensohn
World Bank President.

March 2008

Since Interfund Capital started the China fund web site in the summer of 2003, the Shanghai Stock Exchange (SSE) A share index has returned 348%, the Hong Kong Stock Exchange (HSX) has returned 240%, the China Fund, Inc. (CHN) has returned 245%, and the Greater China Fund has returned 363%. China is the world's second largest economy on a purchasing power parity basis and is driven by a population of 1.3 billion people.

In the summer of 2003, during the SARS epidemic, the principals at Interfund Capital began to believe that China might be an interesting contrarian investment. While researching China funds, it became apparent that, at that time, there were few online resources to help investors research funds and stocks which could benefit from the potential growth in Mainland China. Here is the introduction to the website Interfund Capital created to fill that void:

China enjoys a household savings rate of more than 40 percent, one of the highest in the world. As incomes rise, newly empowered consumers represent an enormous market potential.

For example, about 4 million mobile phones are sold in China each month, the world's biggest market with nearly 250 million subscribers. That's just 16 percent of the population and sales in the last two years have increased 17 percent.

In the last ten years, $400 billion to $500 billion in foreign direct investment has flowed into the country, more than the rest of Asia combined. The inflow of foreign investment brings with it new business practices, which inject vitality to the old economic system. Since 1993, labor productivity has increased four fold.

Foreign firms account for 65 percent of China's three-fold increase in exports in the last ten years. China's exports to the U.S. have increased from 3 percent to 12 percent in the last 12 years, putting China on a par with the UK.

China's December 2001 accession into the World Trade Organization (WTO) is expediting economic reforms and expected to contribute 1 to 2 percent of gross domestic product (GDP) each year.

As well, Beijing will host the 2008 Olympic Games. Analysts estimate that preparations for, and staging of, the event will require an investment of US $34 billion, create 700,000 jobs, and contribute US $170 billion to the output of the economy. In addition, the extra international attention will minimize political risk.

The People's Bank of China said that it has scrapped the yuan peg to the US dollar and repegged the Chinese unit to a basket of trade-weighted currencies.

Under the new exchange rate mechanism, the currency is valued at 8.11 yuan to the US dollar compared to the old rate of 8.2765 yuan.