From News, page 2, issue 337, Oct 15 2007
Translated by Zuo Maohong
Original article: [Chinese]

A sign at the Sijiaowei toll station of Huadu district in Guangzhou reads, "Duration of toll: October 1994- November 2044". Upon seeing this sign, Wang Zechu can't help but laugh. "Is this a joke? The law clearly limits toll durations to 30 years..."

Wang Zechu is a member of the Guangdong Committee of Chinese People's Political Consultative Conference (CPPCC), and has been fighting violators of toll charge regulations for the past 10 years. The Sijiaowei toll station on the Siyang strip of highway, stretches over 6 kilometers through Sijiaowei County. This road was first funded by the local government, but afterwards, it became a toll road owned by a joint venture with a concession period of 50 years. No one knows how many such toll stations there are in China.

50 Years of Toll Charges

The Sijiaowei toll station began to charge vehicles traveling through it after being approved by the Guangdong Provincial Price Bureau in 1996. The tolls were to be in effect from October 1994, when the Siyang segment started operation, to October 2044.

According to Regulations on Toll Road Administration, toll roads are classified into two types: non-profitable, backed by government organs responsible for financing and repaying the debts; and profitable, build-operate-transfer (BOT) models. The durations of toll charges of these two types are respectively 15 years and 25 years, and can be prolonged by 5 years in provinces, autonomous regions and municipalities directly under the central government in Midwest China. The Siyang segment was built by the Huadu government and was originally of the first type.

Data have shown that the Siyang segment is only 6.408 kilometers long and the total amount of investment is merely 52.23 million yuan.

Guangdong province is the pioneer of building roads by loans and charging to repay afterwards. The first toll station in the nation was first set up here in 1984. Over the next 20 plus years, the length of highways increased from 51,000 kilometers to 178,000. At the same time, however, the number of toll stations rose to 304. There are at least 9 toll stations levying charges for 50 years or even more like the one in Sijiaowei.

In October 1994, the parent company of Huadu Road and Bridge Project Development Corporation undertook the construction of the Siyang segment, and, afterwards, cooperated with Huadu Development Corporation in Australia to operate road management services with a concession period of 50 years.

Mr. Li, a principal of Huadu Administration of Toll Charges for Roads and Bridges, tells the EO that the duration of toll charges is 50 years because the concession period in the contract says so. In this way, the road avoids the regulation's restriction of the duration to less than 30 years.

In fact, Huadu Road and Bridge Project Development Corporation conceded 10 percent of its right to charge to Huiyu Corporation in Hong Kong, with a transfer fee of 52.23 million yuan, which means the government was already capable of repaying all the loans at that time. But according to Mr. Li, the loans haven't been paid off so far.

Before the construction of the Siyang strip, the Beijing-Shijiazhuang highway, the first highway in Beijing, also experienced a transfer of management rights. In the end of the year 1999, Beijing transferred its rights to the road to Beijing Capital Road Development, with a concession period of 30 years starting from January 1st 2000.

However, toll stations of the highway began charging right after its construction in 1987 and have charged for the 13 years before the concession. According to statistics released from Audit Office of Beijing in 2005, the loan to build this expressway totals 724.35 million yuan, and was paid off before December 2000. However, as Beijing Roadway Administration Bureau reported to representatives of People's Congress, the debt will be paid off in 2026 according to the calculation of Beijing Capital Road Development Co., Ltd. In this way, the period of toll charges increases by 27 years to a total period of 39 years.

According to statistics from certain representatives of Peoples' Congress including Li Shuyuan, the present 9 highways in Beijing have all been transferred from non-profitable to profitable. Li Shuyuan believes that the transfer of right of management is the fundamental reason why toll charges continue although debts have been paid off.

In June, the National Audit Office discovered from investigations that 16 provinces and cities set up altogether 158 toll stations on 100 roads against regulations to date, and the corresponding illegal toll charges totaled 14.9 billion yuan up to the end of 2005. 7 provinces and cities raised toll charges, levying an extra fee of over 8.2 billion yuan. Income from toll charges of the 35 profitable roads in 12 provinces (cities) is 10 times or even more of the investment fund.

The Foreign Capital Umbrella

Between 1991 and 1999, the ownership rights of 52 highways in Guangdong were transferred, 35 of which shifted to foreign enterprises mainly from Hong Kong and places like Australia, Malaysia and the Virgin Islands. Up to October 2005, altogether 120 toll stations of profitable roads had some form of foreign investment."

Transferring the rights, changing the legal status, and adding projects are the three typical ways of prolonging the toll period." says Wang Zechu. He adds that among the three, introducing foreign investment is particularly popular. "We've signed with a foreign firm, how can we not fulfill our obligations?" is the most common reply from those concessionaires.

20 million state-owned shares were transferred from a listed company Yue Expressway A(SZ000429), the builder of Jiujiang Bridge in Guangdong, to an engineering company in Ipoh, Malaysia in 1996, just eight years after the bridge's construction. Even though the foreign capital only took up 4.52 percent of the total shares of Yue Expressway A(SZ000429), the company proclaimed that the charging period, which would end after 2 years, was adjusted to 30 years since it had introduced a "strategic investment" from Malaysia.

This is where the advantage of transfers lies: the charging period can be reassessed after the transfer and thus the prior charges are no longer considered.
Such situations happen to bridges and highways all the time. Relative laws in China allow the concession of management rights of those non-profitable roads to enterprises before the government pays off the debt, but in most situations, the transfer fee is actually enough to wipe out the debt.

Take the Siyang strip as an example. The original builder can reclaim the total amount of investment by conceding 10 percent of its rights, while still maintaining 90 percent of the income in the following 50 years. Zhu Jun, secretary general of the Academy of Operation and Management of Expressways, says such examples are common throughout China and are direct instances of the connivance of local governments.

Charging out of Control

After seeing the "October 1994- January 2044" sign at the Sijiaowei toll station, Wang Zechu wrote a proposal regarding this issue. In its reply given this July, Guangdong Communication Department admitted that it was illegal for county governments to transfer the ownership of its highways and levy toll charges for 50 years. However, the Department also pointed out that the concession happened before regulations were implemented, and such cases should be dealt with by new rules that should be passed by the state council.

Such provisions have yet to surface. The State Council is reportedly still soliciting comments for more detailed provisions concerning the transfer of ownership rights of highways.

Wang Zechu points out that the salary of a toll collector in some of the local toll stations can be as high as 8 thousand yuan per month, and the interest of communication departments is a significant factor in random patterns of toll charges.
"Roadways are supposed to serve the public, now things have been spoiled and the rights of those who use the roads are being violated!" says Wang.

Beijing Capital Road Development has been sued for several times because of its insistence of charging tolls despite having paid off the loan. It seems that people are drawing more and more attention to dubious toll charges.