China’s New Roads Are Taking a Toll

If Toll Payments Are So High, Why Is China’s Highway System Strapped for Cash?

On July 21, the Ministry of Transport issued a revised draft of its “Regulations on Toll Road Administration,” outlining planned adjustments to toll collection periods.

Four Important Changes:

How Many Toll Roads Are There in China Right Now?

Percentage of Different Kinds of Roadways That Collect Tolls

The Gap Between Revenue and Expenditure Is Widening

Total Toll Road Revenues, 2014

In 2014, total fees collected on toll roads nationwide amounted to 391.6 billion RMB. That’s clear, black-and-white revenue. So why are our toll roads always strapped for cash? Where’s all that money going?

Total Expenditure on Toll Roads, 2014

So in 2014, total spending on toll roads nationwide came to 548.7 billion RMB. That’s a revenue-expenditure gap of 157.1 billion!

The Widening Revenue-Expenditure Gap

Tolls roads are collecting more and more tolls, but they’re losing more and more money!

Snowballing Debt

In 2014 the country’s toll roads cost more money than they made, and debt remained sky-high. With the frenzy of road construction and the increasing costs associated with it, the debt will only continue to swell.

Development of China’s Road System (Class 2 Roads and Above)

Because China is in the midst of a highway-construction boom, almost ⅓ of all tolled highways in the country were built between 2011 and 2014. At the same time, construction costs have increased.

Average Cost to Build a Four-Lane Highway

The average cost went up by 10 million RMB every 3-4 years! And so, during this “burst of productivity,” our highway network has grown at a rate of 204% per 10-year period, and is now the largest in the world, surpassing even the U.S.

Length of Highway Networks of Various Countries

Do they also extract exorbitant tolls?

Tolled vs. Non-tolled Highways, China vs. U.S.

Our highway network is about the size of the U.S.’s, but look at the difference when it comes to tolls! And Canada charges no fees at all: its roads are completely free of toll booths.

GDP Conquers All

But when it comes to demand for highways, you have to consider marginal utility. There will be great demand for highways between major cities, but in remote areas in the west, even places where there are highways have very little traffic.

Take the Ya’an-Xichang Expressway, for example:

This highway cost 21 billion RMB to build: 5 billion in capital and 16 billion in loans. Annual interest on loans is at least 1.6 billion. Basing calculations on year-end data for 2012, with a yearly total of 500,000 vehicles traveling on the highway:

Local governments, which view the situation purely through the lens of GDP, keep building more and more highways. But whether the tolls can cover the interest on the loans for the highways then becomes a real problem.

So actually, the money from the highway tolls we’ve been paying every day could have long ago been used to pay off those loans. But the highway companies took it and used it to build new roads elsewhere. And there’s a good chance nobody’s driving on those roads.

Naturally, it’s not feasible to stop collecting tolls when the collection period is over...

Translated by Austin Woerner.