For Whom the Toll Sells
For decades, China’s extensive network of highways has largely remained toll-free. However, local governments are pushing harder than ever before for tolls to help cover costs and pull them out of debt
The impending opening of a toll highway in East China’s Jiangsu Province has stirred new doubts over the central government’s decades-long attempts to create a free highway network throughout the country.
The charges approved for the stretch of national highway 205 (G205) between the cities of Suqian and Huai’an range between 10 and 50 yuan (US$1.47) depending on the type of vehicle, Jiangsu government stated on October 20.
Suqian has a population of nearly 5 million, while Huai’an has just over 4.6 million residents, according to official data. The distance between the two cities is about 95 kilometers.
While it may not be the first, as more than 10 highway sections across China have introduced toll stations since 2021, the Su-huai highway is not likely to be the last, chengdu.cn reported on November 7, 2023.
Just six days later, Shanxi Province announced a new toll station at the junction of highways G241 and G336. The toll station covers the route from Yangfangkou through Shuozhou to Pinglu, with fixed charges ranging from 10 to 70 yuan (US$1.4-9.8) over a period of 28 years.
On November 22, Shanxi government granted permission for another toll station at Lüliang New Area along G209. The charges will be in place for 30 years.
These new approved toll charges, which have the potential to disrupt the envisioned nationwide toll-free highway network, have sparked controversy. The Ministry of Transport (MOT) stated that the charges are within the bounds of current rules and regulations, which allow local authorities to implement tolls without approval from the central government.
While authorities argued that tolls generate revenue for local governments burdened with debt created from road construction during economic downturns, the decisions prompted outcry over concerns that tolls will increase transport costs and dampen the country’s overall economic recovery.
Moreover, this has put the central government in a tight spot, as local debt is a mounting concern for China.
Outstanding local government debt in 2022 was 35.1 trillion (US$4.9T), a growth of 15.1 percent year-on-year, the Ministry of Finance (MOF) revealed on December 5. In 2021, the growth rate was nearly 18.7 percent. According to the ministry, the central government has tightened control over local government debt, requiring stringent supervision and auditing to prevent it
from threatening the country’s financial stability or further building-up.
Cost of Charging
The Su-huai highway toll received approval from Jiangsu Provincial Development and Reform Commission in 2018. Shuyang County paid around 68.65 million yuan (US$9.61M) for the toll station, which is expected to pay off the county’s nearly 1 billion yuan (US$140M) debt in government loans for road construction.
The section is not the only toll on the G205 highway, which runs from Shanhaiguan, on the East China coast in Hebei Province to Shenzhen, Guangdong Province, on the border with Hong Kong Special Administrative Region. About 93 kilometers north of the SuHuai Section, the Xinyi toll in Xuzhou, Jiangsu Province was supposed to have stopped charging in 1998.
After a costly renovation project, the toll was extended for an additional 16 years to 2014. However, the section still has not ceased charging. As of July 2023, it accepts digital payment.
“Highway tolls can be utilized to upgrade the quality of transportation infrastructure and ease pressure on local governments for debt repayment,” Jiangsu Provincial Development and Reform Commission said in a 2018 document.
China’s highways have four classes. Class I are two-way multi-lane roads with an average capacity of 15,000 to 30,000 vehicles per day. Class II are twolane roads with a daily use averaging between 3,000 and 7,500 vehicles. Class III and IV are county and village routes.
These highways differ from China’s expressway system, which is extensively tolled.
According to toll regulations implemented in 2004, Class I highways can set up toll booths with a minimum distance of 50 kilometers between them. However, tolls are not permitted on other highway classes, except for those designated by the central government in China’s less-developed central and western regions.
As of 2022, Jiangsu had 16 sections of national and provincial highways with tolls. However, Jiangsu is not the only province experiencing a surge in toll stations on its Class I highways.
Two toll stations installed along a Class I highway in Jingmen, Hubei Province increased the city’s toll revenue by over 47 percent from 58.7 million yuan (US$8.22M) in 2021 to nearly 111 million yuan (US$15.54M) in 2022.
Pros and Cons
According to the 2004 regulations, local governments above the county level have the right to charge for the use of Class I and II highways to repay debt or for “profit-driven operations.”
But in 2018, based on years of public opinion surveys, the transport ministry drafted an amendment that would ban tolls on all new highways, viaducts and tunnels.
The draft also restricted provinces from building new toll roads if they are unable to pay off the debt or afford their maintenance.
But from 2021 to 2023, the amendment was absent from the central government’s annual legislative agenda, allowing authorities to continue going into debt to construct roads and repay it through tolls.
Despite this, the number of highway tolls has decreased over the past few decades.
In February 2009, a scheme was implemented to gradually reduce tolls on Class II highways through collaborative efforts from the National Development and Reform Commission (NDRC), the transport ministry and the MOF.
The plan included denying approval for new Class II toll highway projects in certain regions and setting clear timelines to terminate tolls on secondary roads. As a result, from 2009 to 2012, Class II highway tolls in eastern and some central areas were revoked, resulting in a 60 percent reduction in tolls overall. However, provincial governments in western China still have the power to decide whether to toll.
During the first decade of China’s reform and opening-up, there was a slogan around the country saying that “road construction leads to lives of affluence.” Road construction surged over the next decades, stretching from less than 900,000 kilometers of highways in 1978 to 4.77 million kilometers in 2018. During that time, China also built 136,000 kilometers of expressways, the Xinhua News Agency reported on November 17, 2018.
However, new roads are costly. By 2019, cumulative investment in toll roads reached nearly 10 trillion yuan (US$1.4T), with around 70 percent built with loans from banks, Zhong Ninghua, a professor of economics and finance at Shanghai’s Tongji University, told Southern Weekend on August 29, 2021.
According to Zhong’s research into local debt, local government bonds for special purpose projects, mainly for designated economic and social infrastructure projects, issued from 2015 to 2020 reached 12.9 trillion yuan (US$1.81T), with an average growth of 30 percent year-on-year. In 2020, around 18 percent of these project bonds were allocated to transport infrastructure, 40 percent of which were used for building toll roads. The risk is that the average payoff term for the transport project bonds was 14.5 years, much longer than the average term for project bonds, Zhong warned.
Despite the substantial debt that may hinder the toll-free policy, the
State Council, China’s cabinet, issued a circular in September 2016, urging the transport ministry, NDRC and MOF to work together to gradually terminate Class II highway tolls to reduce national logistics costs.
Zhong also emphasized that efficient use of roads is more crucial for sustainable development than merely exacting tolls.
Navigating Alternatives
According to former transport ministry spokesperson He Jianzhong, 95 percent of expressways, 61 percent of Class I highways and 42 percent of Class II highways had tolls as of 2009.
“In the coming years, road tolls will remain indispensable to raise funds for the construction of transport facilities,” He said during a 2009 press conference.
However, by the end of 2008, the State Council initiated a reform to gradually replace tolls on Class II roads with annual subsidies of 26 billion yuan (US$3.64B) funded by a fuel tax. This change was intended to reduce the burden on drivers and encourage local governments to provide toll-free roads.
In 2022, China’s national consumption tax generated 1.6 trillion yuan (US$220B), surpassing the central government’s budget forecast by 111.6 percent. The surplus was attributed largely to increased levies on petroleum and tobacco, according to the annual budget report released by the State Council on June 26.
“Highways should not be defined as publicly invested assets that solely rely on government funding. Actually, funding sources for road construction could be diverse, and charges could vary accordingly,” Wen Laicheng, a professor of Beijing’s Central University of Finance and Economics, told Newschina.
“However, if funds come from bank loans or non-public funded investments, including PPP (public-private-partnership) projects with low-risk guarantees from the government, tolls may be inevitable,” Wen said, adding that most PPP projects only involve expressways.
Concerns about highway tolls have grown among the general public.
For years, residents from Shuangzhao and Qian counties in Xianyang, Shaanxi Province expressed their dissatisfaction with two toll stations along the G312.
Many complained that over the past 20 years, the tolls had increased transportation costs and hindered local economic development.
“To circumvent the charges, many drivers, including our fellow villagers, choose to drive around the tolls,” a local resident told media. The two stations were finally closed in November.