Rail & Infrastructure

Taking their toll

Why China’s local governments view their roads as vital revenue tools

Taking their toll

No free rides in China...

Warren Buffett says that the best place to put your money is ‘toll bridges’. Local government officials across China appear to agree with the world’s third richest man. And that’s a problem, as the proliferation of toll roads is fuelling public anger. Plenty of the expressways are charging illegally, and Beijing seems powerless to stop their spread.

Several central government departments (including the NDRC, the State Council and the Ministry of Finance) are now embarked on their latest attempt to curb unauthorised toll roads. But if previous efforts are anything to go by, getting local government to change their ways will be a struggle.

There have been at least three separate National Audit Office (NAO) reports and two rule changes on the topic over the past six years.

But many local governments simply invent loopholes or skirt the policy updates. The end result is that China is now thought to have over 70% of the world’s toll roads, according to the Beijing Morning Post (totalling 100,000km in length).

Tollbooths are particularly unpopular with truck drivers (who protested in Shanghai earlier this year, see WiC104), and have also been a factor in numerous strikes from taxi drivers across the country.

Of course, the toll revenues offer local governments an important source of additional revenue, especially when they are being told by Beijing to contribute funds for a series of infrastructure and affordable housing projects. So that’s only encouraged local bureaucrats to erect more tollbooths.

According to the spirit of the rules, toll road operators should only collect fees for as long as it is necessary to repay road construction and financing costs. But a loose interpretation of these directives has seen ‘free’ roads turned by local governments into tolled ones, with charging booths appearing more frequently than officially permitted, and fees hiked higher than centrally approved.

How much does this generate? Estimates are difficult to come by, but an NAO report suggested that $2.3 billion had been collected improperly across 18 provinces in the years before 2005 using tolls.

Friction between central and local government is a theme that WiC has covered in some depth, and the challenges in enforcing the rules in road charging highlight it once again. Even the Beijing municipal government (hardly distant from the seat of central government) seems to have exempted itself, according to Capital Week magazine. The Beijing to Shijiazhuang expressway was begun in 1987 and in 1999 a local government-owned company was given a 30 year right to operate it. By 2005 the road had made Rmb9.3 billion, 16 times more than the loan granted to build it. All profits were used by Beijing’s municipal government to invest in other projects.

If the rules can’t be enforced in Beijing, other parts of the country are going to try their luck too. Zhengzhou’s bridge across the Yellow River was built back in 1986 (for $52 million), and took just 10 years to pay its debts. But it will have earned an estimated $530 million in tolls by 2020. (Similar examples can be found in practically every province, says Capital Week. It describes Chongqing Expressway Group as that municipality’s “cashcow” and financing tool).

One method used by local governments to get around the regulations is to incorporate the debts of other projects into toll road spending. A recent NAO report reveals this to have happened with more than half of the country’s toll roads, according to 21CN Business Herald. Time limits on toll charging are also evaded by transferring road ownership to a new entity and applying for an extension, reports Capital Week. Whether the latest push to reform the toll road system is any more effective than previous ones remains to be seen.

But at least there’s a glimmer of hope for drivers in the country’s capital: Beijing cut the toll fee levied on the way from the airport last week. Those entering the city now do so free of charge, rather than paying Rmb10.

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