When the Guangzhou-Foshan (GF) Expressway opened for business in 1989, it was hyped as the Pearl River Delta’s answer to Route 101, the highway that runs through California that helped to shape the Silicon Valley of today.
To celebrate the launch of Guangdong’s first highway, the local government opened the new expressway to all comers for a few hours. More than 10,000 locals rode their bicycles along the new route and for many Guangzhou locals the GF Expressway was their first experience of travelling on a modern highway. More importantly it paved the way for an investment boom in the province’s wider transport network, underpinning Guangdong’s rise as a major manufacturing base.
Last week the GF Expressway laid claim to another milestone event: it became the first road of its type in China to stop charging tolls.
The highway has been operated by Guangdong Provincial Expressway Development (GPED) and the state-owned firm says that the decision to go toll-free came at the request of the Guangdong provincial government (aka GPED’s biggest shareholder). The Shenzhen-listed firm will continue to manage and maintain the GF Expressway for a undisclosed fee, local media is reporting.
The announcement was not a complete surprise for investors. Amid criticism of the excessive fees demanded by some toll road firms, the State Council has directed that operators should stop charging fees once a toll road has been in commercial use for 30 years, although exceptions are made “under certain conditions” (which are generally unspecified).
The longstanding policy is meant to lower logistics costs and support key industries like the country’s booming e-commerce sector. GF Expressway’s ‘tollable’ lifespan should have expired in 2019 under the policy, so it has effectively been given a few extra years to reap returns by the local authorities.
Other highways with 30-year histories have also dropped their former tolls, says Guangzhou Daily, but most operators still charge car drivers some form of fees such as “fuel surcharges”. GF Expressway, however, is now truly free of charge to the public and the GPED should be applauded, the newspaper said.
The decision will add to pressure on other toll road operators to do something similar, with a number of major highways in the Greater Bay Area coming towards the end of their ‘tollable’ lifespan.
One of the busiest routes is the Guangzhou-Shenzhen (GS) Expressway, which commenced operations in 1994. It is arguably the most important transport artery in Guangdong, with Foxconn boss Terry Gou once telling reporters that he had planned the locations of his contract manufacturing plants along it.
The GS Expressway’s contribution to local economic development is undeniable. Yet there have been calls that it should also offer free passage, because of the large volumes of traffic using it every day. A report by the state broadcaster CCTV in 2011 claimed that the highway had already collected more than Rmb30 billion ($4.74 billion) in income (an amount that would be beyond Rmb45 billon as of last year, based on a similar annual take since then), which is twice the amount of its investment cost.
Perhaps the political pressures to cut back on toll charges was a factor in persuading Hong Kong tycoon Gordon Wu, one of the earliest investors in Chinese infrastructure in the 1980s, to sell his company’s interest in GS Expressway to the Shenzhen government in 2018 (see WiC427). The highway is now being operated by Shenzhen Investment Holdings (SIH), a state-owned firm, but the Shenzhen government has resisted scrapping tolls on major highways, saying it will bring too much traffic into neighbouring areas and worsen congestion.
Guangdong officials said something similar about the GF Expressway. But it seems that they were compelled to comply with the central government’s directives. Other local governments in China, as well as the state firms that operate many of these expressways, may soon have to take the same decision.
© ChinTell Ltd. All rights reserved.
Sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.