Building a road is expensive, and continuous management and maintenance are also costly.

For some highways with limited returns and long payback periods, extending the charging period helps to reduce the financial subsidy pressure and increase the enthusiasm of enterprises to invest.

According to the law, extending the toll road charging period, a legislative issue that has been promoted for 10 years, is now accelerating its implementation.

To become wealthy, one must first build roads.

Over the past 36 years, China's expressways have grown from nothing to become the world's largest, and now they are striving to become stronger.

Building a road is too expensive.

In order to better leverage various forms of capital and accelerate road construction, relevant departments established regulations in 1988, allowing "building roads with loans and repaying loans with tolls."

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The Ministry of Transport has previously made it clear that practice has proven that the toll road policy has achieved multiple benefits for the government, enterprises, and the public, and it is the correct choice that fits China's basic national conditions and should be adhered to for a long time.

The current regulations stipulate that the maximum charging period for commercial roads shall not exceed 30 years.

However, now that 36 years have passed, according to relevant standards, the time limit for many toll roads is approaching.

Although at first glance, some construction units have recovered their construction costs.

However, management and maintenance units also need a stable income to manage and maintain roads, ensuring the health and quality of traffic.

At the same time, the development of China's expressways has also reached a new stage.

The eastern coastal region has an early start in high-speed construction, low cost, and small debt scale; in contrast, the central and western regions, as the key areas for new high-speed additions in recent years, have a larger debt scale.

For some roads with long investment return cycles and limited returns, the enthusiasm of enterprises to invest is low.

If the toll road period is not extended, and financial subsidies are limited, the challenges of local expressway construction are not small.

Against the backdrop of a huge gap between revenue and expenditure in the expressway industry, discussions on the revision of relevant regulations, adjusting the toll road charging period according to the law, and other related topics have been going on for 10 years.

Now, this unresolved issue is facing a key breakthrough.

The "Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reform and Promoting Chinese-style Modernization" (hereinafter referred to as the "Decision") reviewed and passed by the Third Plenary Session of the 20th Central Committee of the Party proposes to improve the circulation system, accelerate the development of the Internet of Things, improve the integrated circulation rules and standards, and reduce the logistics costs of the whole society.

The "Decision" also points out that deepening the reform of the integrated transportation system, promoting the reform of the railway system, developing general aviation and low-altitude economy, and promoting the optimization of toll road policy.

In the industry's view, the optimization of toll road policy has entered the programmatic document, which shows a high degree of attention, which is conducive to using top-level design to unblock the difficulties and blockages in the previous legislative work.

On October 31, 1988, after four years of construction, the Shanghai-Jiaxing Expressway was opened to traffic, which was the first expressway in mainland China.

At that time, expressways were still a new concept in China, and whether to build and how to build had sparked many fierce ideological collisions.

Some people opposed it on the grounds that building expressways required a large investment and occupied a lot of land, which was not in line with China's national conditions.

Others actively advocated for the construction of expressways.

Former Vice Minister of Transport Li Jichang recalled that at the earliest stage of construction, they did not dare to call it an "expressway" but only said it was a "car-only road", but it had the necessary conditions to be changed into an expressway at any time.

It was not until the road was built and the parties had a good experience that it was officially named and promoted.

In the same year, the Ministry of Finance, the Ministry of Transport, and the Price Bureau jointly issued the "Regulations on Charging Vehicle Passage Fees for High-grade Highways, Large Highway Bridges, and Tunnels Built with Loans", that is, the "loan road construction, toll repayment" policy.

This policy provided a legal basis for expressway tolls and provided the main source of funds for the development of expressways thereafter.

This broke the shackles of insufficient financial funds and effectively supported the strong demand for road traffic in the rapid development of the economy and society.

The effect was remarkable.

In 2012, China's expressway mileage reached 96,000 kilometers, surpassing the United States for the first time and ranking first in the world.

By the end of 2023, China's expressway mileage reached 183,600 kilometers, with an increase of 6,400 kilometers within the year; the national expressway mileage was 122,300 kilometers, with an increase of 2,400 kilometers within the year.

Now China is accelerating from a major transportation country to a strong transportation country.

On July 21, the full text of the "Decision" was released.

This programmatic document focuses on the major reform measures in the next five years.

It mentions improving the circulation system, accelerating the development of the Internet of Things, improving the integrated circulation rules and standards, and reducing the logistics costs of the whole society.

Deepen the reform of the integrated transportation system, promote the reform of the railway system, develop general aviation and low-altitude economy, and promote the optimization of toll road policy.

Roads are divided into national highways, provincial highways, county roads, and township roads according to their status in the road network, and are divided into expressways, first-class highways, second-class highways, third-class highways, and fourth-class highways according to technical levels.

From the perspective of the operating entity, toll roads are divided into government loan repayment roads and commercial roads.

With the gradual cancellation of government loan repayment tolls for second-class roads and the increase in expressway mileage, the structure of China's toll roads is continuously optimized.

At present, the eastern road network has basically been built, and the future development center of the expressway network will move westward.

According to data provided by United Credit, looking at the regions, Guangdong, Yunnan, and Sichuan have the top three expressway mileages in the country, and the western region's road network scale reached 38.49% of the national share by the end of 2023.

According to the "National Road Network Plan" issued by the National Development and Reform Commission and the Ministry of Transport, by 2030, China will have built a total scale of about 162,000 kilometers (including about 8,000 kilometers of long-term outlook lines) of national expressways, and about 299,000 kilometers of ordinary national highways, among which the national expressway network consists of 7 capital radiation lines, 11 north-south vertical lines, 18 east-west horizontal lines, 6 regional ring lines, 12 urban circle ring lines, 30 city bypass ring lines, 31 parallel lines, and 163 connecting lines.

An expert from a transportation investment group in the East China region told us that some expressway companies with earlier construction and better qualifications have only about ten years left in their remaining operating period; moreover, the construction of expressways is a capital-intensive project, and most of the construction funds come from capital and bank loans, with a considerable debt burden.

The above expert added that the eastern coastal region has an early start in high-speed construction, low cost, and small debt scale; in contrast, the central and western regions, as the key areas for new high-speed additions in recent years, have a larger debt scale.

For some roads with long investment return cycles and limited returns, the enthusiasm of enterprises to invest is low.

If the toll road period is not extended, and financial subsidies are limited, the challenges of local expressway construction are not small.

From the perspective of demand, transportation infrastructure helps to improve logistics efficiency and urbanization level; from the perspective of investment, it is also one of the important ways for government investment in the counter-cyclical economy.

However, the existing "Regulations on Toll Roads" can no longer effectively support the sustainable development of toll roads.

The problems are concentrated in several aspects: first, the unreasonable charging standards and periods make it difficult to achieve investment returns; second, with the continuous increase in construction and maintenance costs, the gap between revenue and expenditure is expanding day by day, and the debt risk is intensifying; third, the multi-model management and multi-standard charging model is not conducive to the overall benefit of the road network.

Since 2022, the Ministry of Transport has no longer disclosed the national expressway toll revenue and expenditure situation, but from historical data, there is a huge gap between revenue and expenditure in the expressway industry.

Data from United Credit shows that the total expenditure is mainly for the repayment of principal and interest of existing debts, accounting for 82.33% in 2021.

Due to the large scale of existing debts, the annual toll revenue of the expressway industry cannot cover the repayment of principal and interest for the year, and can only cover the interest expenditure.

According to the existing "Regulations on Toll Roads", the maximum charging period for government loan repayment toll roads is 20 years, and the maximum charging period for commercial roads is not more than 30 years.

Since 2013, the revision draft of the "Regulations on Toll Roads" has been soliciting opinions from the public many times and has been included in the annual legislative work plan of the Ministry of Transport many times.

At that time, one of the major revisions of the draft was to adjust the charging period.

However, it has not been revised to this day, which shows the difficulty of the revision work.

This problem that has been lingering for more than ten years is expected to be broken through.

In the "State Council's 2024 Annual Legislative Work Plan" announced by the State Council, the administrative regulations to be formulated and revised include the Regulations on Toll Roads (Revised).

With the formal implementation of the "Measures for the Administration of Concession Operation of Infrastructure and Public Utilities", the revision of the Regulations on Toll Roads may gradually be put on the agenda.

The person in charge of the Legal Department of the Ministry of Transport said in an interview with the media that they will focus on accelerating the construction of a transportation power target task, actively respond to the development needs of the industry, accelerate the filling of legislative weak points and blank areas, adhere to open-door legislation, and effectively improve the quality and efficiency of legislative work.

Gu Dasong, the executive director of the Transportation Law and Development Research Center of Southeast University, analyzed for us that the optimization of toll road policy has entered the programmatic document, which shows a high degree of attention, which is conducive to using top-level design to unblock the difficulties and blockages in the previous legislative work.

Gu Dasong added that after all, roads objectively need relevant input for management and maintenance after construction.

And the existing toll road charging model is relatively outdated, and with the expiration of the road age, the collection of maintenance fees urgently needs a legal basis.

How to make toll roads legally compliant, and even high-quality development, requires the system improvement of the "Highway Law" and the "Regulations on Toll Roads".

There are also some issues of concern in the industry that are expected to be echoed.

Gu Dasong introduced that, like the free policy of expressway sections during holidays, for the managers of toll roads, whether there should be compensation for the amount of reduction, and how to compensate, all need clear instructions from relevant regulations.

This is also a topic that investors from all walks of life have been concerned about for a long time.

"Looking forward to the implementation of flexible tolling on highways."

Xu Bin, the director of the research department at UBS Securities, told us that when some sections of the road become congested due to increased traffic, congestion fees can be added; when traffic decreases and the road is less crowded, fees can be reduced.

Through a flexible pricing mechanism, road traffic efficiency can be improved, the driving experience for drivers and passengers can be enhanced, and operators can increase their return on investment.

On July 31, Wang Dongwei, the Deputy Minister of Finance, stated at a press conference held by the State Council Information Office that for the issue of toll roads, the principle of "beneficiaries pay" will be followed to promote the optimization of relevant policies.

Xu Bin believes that China's annual fixed asset investment in highways is over 2.5 trillion yuan, and to maintain large-scale investment and ensure the status of a transportation powerhouse, it is imperative to introduce more social capital and diversified investment entities.

The premise for this is that the return on investment must be certain, as well as forming a good exit mechanism.

A research report released by Changjiang Securities pointed out that, tracing back to the source, the construction costs are too high for the Chinese highway industry to achieve a balance of income and expenditure in the long term, and the debt exposure continues to expand.

Coupled with the increasing fiscal pressure of local governments in recent years, it may be necessary to break through the existing thirty-year tolling policy.

Although the practical impact is limited, the introduction of the 2024 edition of the "Management Measures" sends a clear policy signal that a substantial breakthrough in the tolling period of highways is getting closer.