"There is a lot of work to be done before we can make money in the market, including the construction of infrastructure and distribution networks," he said.

At present, there is not much demand for lubricating oil, because the number of private cars on the road is still low, given the size of the population, said Golubock.

In contrast to the huge annual production capacity of 4.2 million tons of base oil - the raw material of lubricating oil - the market demand stayed at 2.9 million tons in 1999.

"It may take several years for foreign companies to develop the market," Golubock said.

"But it is expected to be a very lucrative market in the future," he added. "The demand for lubricants in China is increasing quickly, as the nation is encouraging individuals to buy cars and more people can afford them because of the improvement in living standards."

Statistics show that automobile production in China this year is expected to reach 736,000, up 22.7 percent from last year. Insiders believe that with the development of car consumption, the demand for lubricating oil is likely to double the current level of production, to 6 million tons by 2010.

"However, most of China's lubricating oil refineries are not able to meet high-quality standards. And they have little technology to develop lubricants," Golubock said.

Although Chinese companies have a 70 percent share of the domestic lubricating oil market, foreign companies have the majority of the "high-grade products" market.

"Chinese companies have acknowledged that the market for high-grade products is more profitable, and they have already turned a keen eye on it," said Golubock.

"So the best way for overseas companies to develop the market is to join hands with domestic companies to combine the advanced technology of foreign companies with the market awareness of domestic companies," he said.

"But setbacks in the Chinese market may dampen the enthusiasm of foreign companies to expand their presence in China," added Golubock.

"One of the barriers is that for any foreign company exporting from the US to China, its Chinese trade partners must have an import licence - but only a few Chinese companies have such licences. Although it is understandable that the government regulates the market, it is difficult for legitimate companies to export," he added.

"We are anxious to see the government lower tariffs and make it easier for us to sell products or directly manufacture in China."

According to Golubock, an import tariff of 28.5 percent is imposed on lubricating oil products which he says should be lowered after China's entry into the World Trade Organization.

(China Daily 02/12/2001)