Most important, Agashe told both the ICIS World Base Oils Conference in London and a follow-up webinar 28 Feb., Chinas economy is transforming. For the past 20 years, and particularly for the past five, Chinas economy was export- and investment-driven, highly favorable to multinational companies. It was a low-cost manufacturing base, with economic activity focused in its coastal regions.

But under its new five-year plan, China will become a more stable, consumption-oriented nation, moving to value-added manufacturing. And Chinas vast interior is to be the next big growth miracle. A massive middle class is emerging in the inland areas where domestic oil companies have traditionally dominated.

Multinationals will face more difficult conditions due to changing government policies and the shift to domestic consumption, Agashe predicted. The government is eliminating tax incentives and requiring multinationals to offer state-of-the-art technologies.

Chinas finished lubricant market is huge: 7 million metric tons in 2010, mushrooming to 9.3 million tons in 2015 and topping 12 million tons by 2020, Kline projects. PetroChina and Sinopec already have 43 percent of the market. With their captive base oil supply and strong ties to end users they are an ever-increasing force. (Independent blenders have 30 percent, and multinationals have about 27 percent.)

To succeed in China, Agashe concluded, multinationals will need dual strategies for coastal and inland markets. Do you have the right products, she asked. Can you hold onto the high end of the market? What technologies are you willing to trade? Whats worth giving up? How will you compete with government-backed players?

Were delighted to bring you an informative and provocative issue this month. Dont miss Mark Townsends profile of Emirates National Oil Co. on page 30 and Tim Sullivans roundup of friction modifier developments on page 24.