Roads take an unbearable toll

The exorbitant profits generated by China's highway tolls have once again provoked public anger.

According to their 2011 annual reports, 13 of the 19 domestic highway companies listed on the Shanghai and Shenzhen stock markets achieved an average gross profit growth of 56.08 percent in 2011 - 91.14 percent for Chongqing Road and Bridge Co - comfortably outperforming the country's listed real estate enterprises, the high profit makers in recent years.

At a time when ordinary Chinese people are complaining of their income growth failing to catch up with rising prices, the windfall gains netted by the country's highway companies have undoubtedly hit a raw nerve.

And the high tolls have long been denounced as a key factor fuelling rises in China's logistical costs and pushing up the prices of both manufactured goods and farm produce.

In 1984, the State Council approved a highway construction policy that allowed provincial governments and contracted private companies to raise money for highway construction and recover it through tolls.

Such a loans-dependent road construction model played a positive role in improving the country's underdeveloped road network, when the country was not financially powerful enough to inject enough public funds into highway construction. However, with the GDP-dominated performance assessment mechanism for local governments and in the absence of an explicit and binding State-level monitoring mechanism, such a model has been abused in some regions and even viewed as an important means of increasing local fiscal revenues.

As part of efforts to stimulate the slowed economic growth following the onset of the global financial crisis, a new and larger road construction campaign was launched, further enlarging the country's highway network.

This has increased logistic costs because of all the toll stations. It has even been suggested the logistical costs from Guangzhou to Beijing are more than they are from Guangzhou to the United States.

According to a World Bank report, China has 100,000 kilometers of the world's 140,000 km toll highways.

Because of the huge profits, the highway sector has become a fertile field for corruption, and there have been frequent scandals surrounding highway construction and their contracting to private companies. That four successive heads of the traffic department in Henan province, the province with the longest highway mileage in China, received prison sentences for their misdeeds, testifies to the scale of the problem. The increased costs brought by corruption and other malpractices are undoubtedly shifted to road users.

Some road construction through financing and bank loans can help ease the pressure on local finances, in which case it is reasonable to moderately charge road users within a set period of time. However, with the increase of their financial strength, local governments should undertake more responsibility for road construction instead of completely shifting their responsibilities to commercial operations. The construction of highways should be on a need basis not a profit basis.

In June 2011, the National Development and Reform Commission, together with five other State departments, launched a new nationwide campaign to eradicate unreasonable and over-extended toll charges. However, most highways still collect a toll.

For example, the 19-km Beijing Airport Expressway, which opened in 1993, had a total investment of 1.165 billion yuan ($185 million), 765 million yuan in loans. After charging tolls for three years, the Beijing government approved a 30-year toll period. In response to the multi-department rectification campaign, the Beijing authorities decided to halve the one-way toll fee to 5 yuan per vehicle in July 2011.

At a time when China faces inflation pressures despite its obvious economic deceleration, a sweeping and more forcible nationwide campaign should be launched on toll roads to lower the country's logistic costs and curb the excessive profits of highway companies.

The author is a writer with China Daily. E-mail: wuyixue@chinadaily.com.cn

(China Daily 04/25/2012 page8)