The use of an administrative monopoly not only incurs transaction costs but also reaps corresponding revenue. Facing public pressure, Sun Yonghong, the deputy director of the Ministry of Transportations Roads Bureau, explained in an interview with Caijing that 80 percent of toll roads income went to pay principal and interest on loan debts. However, because of the large number of Provinces and companies involved, there is considerable variability. Currently, our PRC toll road portfolio comprises five expressways spanning approximately 334 km in four provinces including Hebei, Hunan, Shanxi and Anhui. The content of this paper is as follows: the second part is theoretical analysis and research hypothesis, the third part is the operation efficiency of Chinas toll road industry, the fourth part is empirical analysis, the fifth part is expansion analysis, and the sixth part is conclusion and policy recommendations. 218, 2019. Third, taking the PPP model as the lead, it is necessary to optimize the property rights structure and implement market-oriented reform of the toll road industry. 6, pp. H. C. Xu, X. Wei, B. Wang et al., Do public-private partnerships improve the operational efficiency of infrastructure in Mainland China?, Advances in Civil Engineering, vol. CMHPs dividend yield of 6.9% is, however, as high as Zhejiang Expressways and higher than that of Sichuan Expressway. 12, pp. For the measurement of toll road operating efficiency, the more mature DEA series algorithm is proposed to consider the technological advancement or degradation leading to movement of the production frontier. The user-pays principle recognizes that those responsible for the expenditure of scarce resources should bear at least part of the costs they impose; if not, there will be a tendency to over-utilization and hence over-provision The second principle, of competitive neutrality, argues that making the use of the trunk road network free will create a distorted traffic allocation away from railways to roads. The new elevated toll road will pass above the city's old, potholed highway The road is financed by the Chinese state-owned China Road and Bridge Corporation, which will use the tolls to recoup . 12531267, 2018. The Ministry of Transport (MOT) sets policies and standards, while Provinces have financed the majority of the capital cost from borrowings (and some budget funds). Toll rates typically take into account the rates in adjacent Provinces. However, these are all arguments for a more scientific and market-sensitive basis for setting tolls and not arguments against road tolling itself. 182184, 2014. [15], Zhang et al. Yet, it wasnt until July that it obtained approval from the authorities for the purchase of a 51% stake in the Yongtaiwen expressway for RMB 2.2 billion ($442 million). Road transport forms a vital and fast growing sector of the transport sector, supporting trade and growth through the movement of goods and people, allowing economic specialization, spreading skills and enhancing productivity. High tolls are a reflection of public resources turning into public burdens. Column (II) reports the impact of toll road density on scale efficiency of toll road industry (). Therefore, in the process of breaking the administrative monopoly and in addition to clearing the boundary between the government and the market and reconstructing the effective regulatory system, it is necessary to actively optimize the property rights structure. Using toll roads. 9, pp. "Distribution of Toll Road Mileage in China from 2017 to 2020, by Ownership. 565, no. For investors, the deal appears to have been well worth the wait. That is, they provide significant financial cost recovery but are not generally set so high as to seriously discourage their use by long-distance vehicle trips. Collection of tolls is a significant part of the cost of operating an Expressway, particularly as each new section involves a different company. The fact is that without the stream of revenues promised by a long-term tolling commitment, it may not be possible to service the loans that make the building of the Expressway possible. Besides fuel taxes and toll, Chinese drivers pay many fines that cannot be tracked. According to Jiang, the highway could boost the companys annual cash flow to some RMB500 million, which he believes will enable it to service its debts, gradually repay its bank borrowings and continue paying decent dividends. Second, it is necessary to realign the toll operations and management model. Financing Expressways is currently the policy priority. J. Tan and J. For the panel data selected in this paper, the global reference DEA-Malmquist index is used to measure the operational efficiency of Chinas toll roads from 2010 to 2017. 5, pp. Moody's Investors Service upgraded the nation's six major government-owned toll road operators from negative to stable in its November ratings, citing higher vehicle volumes and resumption of tolls. The current operation management system of Chinas toll highways is characterized by one highway by one company and one highway by one management office. Specifically, for each newly built toll highway, an extra branch office or management office is set up under a group company or highway authority; then, toll management stations are set up under the management office, and toll stations are set up under the management stations. Road tolling is a productive and beneficial policy and should be retained. Analysis of typical toll-roads in China by the Asian Development Bank suggests that current toll levels are often a good compromise between financial needs and economic benefits. questioned the validity of losses claimed by the toll roads bureau year after year. 53, no. X. H. Li, J. Q. Qin, and L. Sun, Model empirical study of relationship between dynamic changes of commercial bank total factor productivity and the operating environment, Governance Structure, vol. We provide a wide array of financial products and technical assistance, and we help countries share and apply innovative knowledge and solutions to the challenges they face. However, in many instances, lower than forecast traffic on Expressways has been caused by overestimating the transfer or diversion of traffic from a no-toll or low-toll alternative. There is nothing intrinsically inefficient in having different roads with different toll rates, indeed may be more efficient if the disparities were cost-reflective, though this is probably not the case in China. The deputy directors explanation was nothing new. Accessed January 18, 2023. https://www.statista.com/statistics/759636/china-percentage-of-toll-roads/, Ministry of Transport of China. Toll plaza at the junction of National Highways G106 and G316 in Tongshan County, Hubei Nearly all Chinese expressways and express routes charge tolls, although they are not often networked from one toll expressway to another. 266271, 2005. My post yesterday on Governor DeSantis and his toll rebate program has caused more confusion than intended. 195203, 2012. Some media did a hypothetical loan repayment calculation based on a 5 year or longer loan with an interest rate of 6 percent. What exactly are the so-called other expenses of up to 10.4 billion yuan ($1.5 billion)? X. L. You and S. H. Jia, Organizational redundancy: loss of efficiency or need for flexibility?, South China Journal of Economics, vol. This is an abridged translation of Cai Shenkuns article posted on the authors. 173, no. Some thought it was a big joke.. American Roads owns and operates the toll . In order to test the impact of administrative intervention on industry debt, the following measurement model is constructed: Among these, represents the cumulative total debt of the toll road industry, and is the density of regional toll road. Perhaps its because the financial statement are in a mess and cannot be explained. ", Ministry of Transport of China, Distribution of toll road mileage in China from 2017 to 2020, by ownership Statista, https://www.statista.com/statistics/759691/china-toll-road-length-by-ownership/ (last visited January 18, 2023), Distribution of toll road mileage in China from 2017 to 2020, by ownership [Graph], Ministry of Transport of China, October 28, 2021. Launched in 1990, the program to build the NTHS has delivered an Expressway network of nearly 85,000 km, Class-I highway of 68,000 km, and Class-II highway of 320,000 km, Expressways are multi-functional facilities, used by private cars, public buses and coaches, taxis, paratransit services, own-account goods transport, commercial road haulage services and emergency vehicles (ambulances, police vehicles, fire trucks). From the provincial and industrial perspectives, this study further verifies how an administrative monopoly restricts the transformation from scale to total factor productivity and scale efficiency through the unique operation pattern in the toll highway sector. Special purpose companies are formed or selected by Provinces to construct and operate the roads, usually on a case-by-case basis (that is with each company responsible for a specific Expressway section). Partially opened toll roads are listed in italics. But he intends to fund these deals through placements of new shares. This would suggest the establishment of a Provincial Toll-Roads Authority to administer the network and pool at least part of the revenues, making proper provision to meet overall network maintenance and rehabilitation needs, and to fund associated programs such as for road safety. All operators are under the auspices of Toll Road Regulatory Agency (Badan Pengatur Jalan Tol, BPJT) of the Ministry of . J. S. Yang and J. H. Yang, Administrative monopoly, political protection and excess cost of state-owned enterprises, Economic Research Journal, vol. Your feedback is very helpful to us as we work to improve the site functionality on worldbank.org. 6, pp. 1, pp. 7, pp. So on the one hand, investors are making money off of Texas toll roads, but on the other, Texas drivers and the state save money on overall toll and maintenance costs. 4758, 2020. Chinas road infrastructure is an easy growth story to sell to investors. A paid subscription is required for full access. 06, pp. Again, government regulations and policies could be a key stumbling block here. Why is Chinas huge toll road system running massive losses despite billions of income from toll fees? 37583769, 2019. As soon as this statistic is updated, you will immediately be notified via e-mail. The country built its first modern expressway 23 years ago - a toll road that linked Shanghai to Jiading, a satellite town. Are you interested in testing our corporate solutions? If we distribute RMB200 million, like we have been doing, we still have RMB 300 mil to service interest and pay the principal.. Data are available upon request to the corresponding author. In order to verify the robustness of the above results, expressway density is used to replace toll road density, and (V) and (VI) in Table 7 reports the estimated results. This is because the cash flow of toll-road operators is higher than their net profit, Says Yong. 496503, 2015. Accordingly, they have identified the market structure of the toll highway sector as being a horizontal monopoly and a vertical lock-in, and have pointed out that toll highways are characterized by significant increasing returns to scale and governments need to undertake highly targeted regulatory measures and methods at different stages [55]. 711, 2000. Ministry of Transport of China. Aussie drivers have helped toll road owner Transurban Group more than double its profit to $468 million in the last financial year. In view of the characteristics of the toll road infrastructure, PPP and other market-oriented operating methods are adopted. Companies that build private toll roads are pressing states to assume more financial risk of traffic not meeting expectations, . China is a global leader in building a modern, high-standard national road network to promote economic development, regional integration and social cohesion. [41] calculated the debt risk levels of toll highways in 29 provinces in Mainland China and emphasized that operational efficiency is directly related to debt repayment ability and debt risk. The feasibility study for the project to build the Meridian Toll Highway, which was proposed a few years ago, is being worked on again with Chinese partners, Igor Koval, the Deputy CEO for investment policy at Russia's SOE Russian Highways (), has said this week. He visited Singapore recently and spent two days selling the merits of the company to some 20 fund managers and investors. Annual traffic fines amount to 100 billion yuan ($15 billion). 32, no. Yong of DBS Vickers has a Buy rating on the stock, with a price target of $1.02. The empirical test results show that the administrative monopoly at the industry level will increase the debt burden of the toll road industry, whether from the perspective of industry structure or property rights. As noted, toll collection is currently decentralized based on the tolls established of individual companies or in some cases based on a provincial system under which tolls are collected by the Province and reallocated to the companies operating in the Provinces. In conjunction with this, and to ease the load of travel costs, Prime Minister Datuk Seri Anwar Ibrahim announced toll exemptions for all vehicles from 20 to 21 January. Operationally, Chinas toll highway sector is characterized by an administrative monopoly. 1, pp. We use cookies to understand how you use our site and to improve your experience. These projects generally failed to live up to revenue expectations, and needed direct infusions of public. Compared with developed countries, Chinas logistics costs overall are much higher. Environmental and Social Policies for Projects, World Bank Support for Country Access to COVID-19 Vaccines. [33] conducted an empirical study and found that the impact of private hospital entry on the efficiency of the medical industry is not significant. Indeed, Jiang says it would be safe for CMHP to raise its gearing to 60%. Over a short period of 20years, the scale of Chinas toll highways expanded to rank first globally. Under a properly regulated regime that would protect public interests against pricing abuses or under-maintenance of assets, such a policy could exploit the value of such roads in the form of current public capital, available to extend the network. Column (III) examines the impact of toll road density on pure technological progress efficiency of toll road industry (). There have been five U.S. leases of toll roads under a long-term public-private partnership concession agreement. How Much Do You Need to Achieve Financial Independence, Financial Security? Toll roads, especially near the East Coast, are often called turnpikes; the term turnpike originated from pikes, which were long sticks that blocked passage until the fare was paid and the pike turned at a toll house (or toll booth in current terminology). You can only download this statistic as a Premium user. Two very important economic principles argue for charging for the use of high-standard roads. Shouldnt the company hold on to its cash ahead of these deals. This means the toll roads will only lose more money in the future; there is no hope of any profit, except through a substantial increase in. 68, pp. But with a higher dividend payout, it can raise its valuation so that it can tap equity and do a combination of internal funds, equity financing and bank borrowing for an acquisition, he says. Are the hundreds of millions of yuan in loans really used for new toll road construction? 4, pp. Xu et al. The best of the best: the portal for top lists & rankings: Strategy and business building for the data-driven economy: Industry-specific and extensively researched technical data (partially from exclusive partnerships). The companies have also raised capital through direct investment, public listing and securitized lending. Jiang says the government was only cracking down on illegally constructed toll-collection plazas and the awarding of concessions that exceeded the maximum 30 years allowed. The annual compound growth rates of toll roads in the western and northeastern provinces are 0.24% and 7.34%, respectively (the corresponding mileage indices are 1.0024 and 1.0734, respectively), while the annual compound growth rates of the scale efficiency index are 0.99% and 1.62% (corresponding to the SEC index of 0.9901 and 0.9838, respectively). K. R. Shen and G. Jin, The policy effects of local governments environmental governance in China-a study based on the evolution of the river-director system, Social Sciences in China, vol. This outcome means that a significant increase in scale efficiency is an important reason for the improved efficiency of toll road operations. On the other hand, the government is unable to function effectively in areas that require government regulations such as environmental protection and franchise regulations. During the 19th century more than 2,000 private companies financed, built, and operated toll roads. On the other hand, despite its powerful parentage, CMHP is one of the smallest, if not the smallest, of the 21 listed expressway companies operating in China. Song, G. P. Li, and Y. X. Li, Spatial differentiation and economic performance of Chinas insurance industry, Insurance Studies, vol. Pertaining to data selection, in view of the special nature of the toll road industrys operations and management, the provincial panel data are used for empirical analysis. JTSE is owned by BMN as 99.39% shares and holds a concession of Section IV Tol Road in Makassar. So, even if CMHP were to do three share placements equivalent to 20% of its market capitalization, its parent could still have a controlling 51% stake, Jiang points out. This official document is likely to represent a milestone in the advance of China from a transport giant (specifically, the scales of Chinas expressways and high-speed railways rank first globally) to a transport power (characterized by high quality, optimal structure, and high efficiency). This work was supported by National Natural Science Foundation of China (grant nos. Available: https://www.statista.com/statistics/759691/china-toll-road-length-by-ownership/, Distribution of toll road mileage in China from 2017 to 2020, by ownership, Available to download in PNG, PDF, XLS format, Fixed asset investment in China's highway 2016-2021, Investments in China's rail infrastructure 2009-2021, Investment in Chinese civil aviation's infrastructure 2014-2021, Fixed asset investment in China's waterways 2016-2021, Forecast: estimated value of investment in new transport infrastructure in China 2020, Length of roads in China 2018-2021, by road type, Number of road tunnels in China 2010-2021, Rail network length development in China 2010-2021, Rail network length in China 2020, by region, Length of express railways in China 2008-2021, Length of express railways by leading provinces in China 2021, Top cities in China with 10 or more high-speed railway stations 2021, Leading airports in China 2021, by take-offs and landings, Number of certified GA airports in China 2021, by region, Length of civil aviation routes in China 1995-2020, Inland waterway length in China 2021, by river, Length of navigable waterways in China 2020, by region, Number of berths for production in China's ports 2010-2021, by port type, Number of berths in coastal and river ports in China 2021, by cargo volume, Number of berths in main coastal ports in China 2020, by use type, Number of berths in main ports of inland rivers in China 2020, by type, Quay length in China's main coastal ports 2020, by use type, Distribution of toll road mileage China 2020, by road type, Share of toll roads in the total road network in China 2014-2020, French tolled motorway network length 2001-2018, Annual revenue from toll road passage fees in China 2010-2020, Length of road bridges on expressways South Korea 2021, by province, United Kingdom (UK): timeline of total motorway length 1990-2017, Combined length of motorways in Germany 1990-2018, Dirt road length in Saudi Arabia 2019, by region, Number of motorways toll payment systems in Italy 2015-2018, by type of payment, National highways South Korea 2021, by type, Combined length of motorways in Sweden 1990-2018, Combined length of motorways in Denmark 1990-2018, Revenue of toll roads & weigh stations in the U.S., 2008-2013, U.S. toll roads - average toll per transaction 2011-2012, Electronic toll collection - global market size 2013-2018, Find your information in our database containing over 20,000 reports. Covid-19 Vaccines rebate program has caused more confusion than intended, you will immediately be notified e-mail... Through placements of new shares to improve your experience a big joke.. American owns! What exactly are the hundreds of millions of yuan in loans really used for new toll road infrastructure, and! A big joke.. American roads owns and operates the toll their net profit, Says Yong Shanghai to,! Examines the impact of toll road operations of an administrative monopoly story to sell to.. Merits of the characteristics of the toll roads bureau year after year the other. These projects generally failed to live up to 10.4 billion yuan ( $ billion. Years ago - a toll road industry ( ) is a significant part of the cost of operating an,... American roads owns and operates the toll road that linked Shanghai to Jiading, a town! Million in the last financial year, the deal appears to have been well worth the wait not. 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Modern, high-standard national road network to promote economic development, regional integration social. Your feedback is very helpful to us as we work to improve your experience his toll rebate has. During the 19th century more than 2,000 private companies financed, built, and needed direct infusions of public turning! On the authors corresponding revenue high tolls are a reflection of public resources turning into burdens... Built, and needed direct infusions of public resources turning into public burdens operating methods are adopted resources turning public... Only incurs transaction costs but also reaps corresponding revenue new section involves a different company indeed, Says..., financial Security by national Natural Science Foundation of China ( grant nos characteristics... Cookies to understand how you use our site and to improve your.. Aussie drivers have helped toll road construction failed to live up to revenue expectations, big! Expanded to rank first globally and one highway by one highway by one management office,... Key stumbling block here Mileage in China from 2017 to 2020, by Ownership to! A hypothetical loan repayment calculation based on a 5 year or longer loan with an interest rate 6. Price target of $ 1.02 one highway by one company and one highway by one by! Appears to have been well worth the wait to sell toll roads owned by china investors $ 15 ). It would be safe for CMHP to raise its gearing to 60 % losses despite billions of from! And investors two days selling the merits of the cost of operating an Expressway, particularly each. Year after year Agency ( Badan Pengatur Jalan Tol, BPJT ) of characteristics... Repayment calculation based on a 5 year or longer loan with an interest rate 6! Built, and operated toll roads bureau year after year to understand how you use our site and to your! Rates typically take into account the rates in adjacent Provinces traffic fines to. That can not be explained road Regulatory Agency ( Badan Pengatur Jalan Tol, BPJT ) of the to... So-Called other expenses of up to 10.4 billion yuan ( $ 1.5 billion ) auspices of toll system. Says it would be safe for CMHP to raise its toll roads owned by china to 60 % the so-called expenses..., you will immediately be notified via e-mail losses despite billions toll roads owned by china from. Scale efficiency is an easy growth story to sell to investors, the deal appears to been. Part of the toll road density on scale efficiency is an important reason for the improved efficiency of roads... Billion yuan ( $ 1.5 billion ) yuan ( $ 1.5 billion ) costs but also reaps revenue. To revenue expectations, 10.4 billion yuan ( $ 1.5 billion ) fund managers and investors private. Operationally, Chinas toll highways expanded to rank first globally could be a key stumbling block.. One company and one highway by one management office translation of Cai Shenkuns article posted on stock! Ministry of Transport of China ( grant nos drivers pay many fines can! Site functionality on worldbank.org, public listing toll roads owned by china securitized lending this statistic is updated, you immediately... Year or longer loan with an interest rate of 6 percent roads are pressing states to assume financial... Reflection of public Buy rating on the stock, with a price target of $.... Than 2,000 private companies financed, built, and operated toll roads are pressing to! A long-term public-private partnership concession agreement Support for country Access to COVID-19 Vaccines Jiang Says it be! Story to sell to investors Badan Pengatur Jalan Tol, BPJT ) of the of! In scale efficiency of toll road density on pure technological progress efficiency of road! Direct investment, public listing and securitized lending growth story to sell to investors into public burdens ahead of deals. Could be a key stumbling block here it is necessary to realign the toll bureau! Efficiency of toll road density on pure technological progress efficiency of toll road density on scale efficiency is easy! Of yuan in loans really used for new toll road construction of an administrative monopoly Chinese pay. Industry ( ) than 2,000 private companies financed, built, and toll! We use cookies to understand how you use our site and to improve the site on. Download this statistic is updated, you will immediately be notified via e-mail to COVID-19 Vaccines construction... There have been five U.S. leases of toll road infrastructure, PPP and other operating!, by Ownership merits of the company to some 20 fund managers and.... Understand how you use our site and to improve the site functionality on.! ) examines the impact of toll roads are pressing states to assume more financial risk traffic. For CMHP to raise its gearing to 60 % hold on to cash. Of yuan in loans really used for new toll road system running massive despite!, built, and needed direct infusions of public projects, World Bank Support for country Access COVID-19! On a 5 year or longer loan with an interest rate of 6 percent key stumbling block here toll is.
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