Forbes: Toll roads prohibit China from benefiting from its highway system

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The Cost Of Driving In China
Toll roads prohibit the nation from enjoying the economic benefits of its vast highway network.
Paul Midler 04.20.10

HONG KONG – China will spend $300 billion on high-speed rail lines over the next 20 years. The world has seen nothing like it, and China-watchers have responded by drawing analogies to America’s transcontinental railroad, built in the 19th century, or its interstate highway system, built and expanded throughout the 1950s and 1960s.High-speed rail is not the only thing on the nation’s infrastructure to-do list. China’s General Administration of Civil Aviation has budgeted $62 billion to build 100 new airports by 2020. All of this new infrastructure is being seen as the signs of progress, but what has been missed is how high-speed rail and the new airports are a way for China to get around a major problem it faces–an exorbitant, toll-based road system.

Have a mind to jump in your car and drive from Guangzhou to Beijing? Don’t forget to bring your wallet. The expressways connecting the south to Beijing are expensive, and a trip to the nation’s capital will run you close to $200 each way. Driving on toll roads in China–and almost all of the country’s expressways cost money–runs an average of 0.5 yuan (7 cents) per kilometer, or nearly 12 cents per mile. For many types of cars, the tolls are greater than the cost of the fuel burned.

The jacked-up cost of auto travel in China actually makes high-speed rail seem affordable, but tickets for high-speed trains are still out of reach for most Chinese. The speedy rail line meant to connect Beijing to the southern province of Fujian was closed after only two months in operation due to a lack of commercial interest.

Other problems with China’s high-speed rail include poor planning. The high-speed rail lines connect only two, sometimes three, major cities. The tracks do not cover the country well; they will not necessarily take folks to where they want to go. They are by no means linked into a network, and already people are complaining that the rail stations do not connect properly to mass transit systems. For many who choose to take existing high-speed rail lines, it can take longer to get to the rail station than it does to ride the train from Point A to Point B.

Transportation infrastructure in China is a curious phenomenon. One of the observations made by New Yorker writer Peter Hessler in his travel book Country Driving is that while China’s expressways are clean and well-maintained, they are by and large empty. You can ride down many highways and find your car the only one in sight. What an odd contradiction for an economy said to be the world’s largest auto market!

Like it or not, the long-term potential of major auto companies in China–including Ford, Volkswagen, Honda and Toyota–is going to be affected by how the country deals with the high economic barrier posed by road tolls.

Japan is in the process of doing away with toll roads, which today account for 18% of its highway network (excluding the Tokyo Metropolitan and Hanshin Expressways). Japan’s Democratic Party pledged to give back thousands of kilometers of fee-based expressways as a political gesture, but the net effect will likely be to lift the economy ever so slightly.

China privatized its expressways as a way of quickly establishing an extensive network. While that was great for the short term, the policy decision means that the highway system may never belong to the public, that it will for some time represent corruption of some kind.

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Chinese leaders have no difficulty tearing down entire villages for the sake of a new high-speed rail line, but getting local and other stakeholders to agree on reforming the expressway system will be an enormous challenge in the not-too-distant future.Infrastructure is critically important to an economy; transportation is the cornerstone of commerce. A nation whose citizens move around unencumbered is better able to grow and do more business.China’s auto market is seen as an attractive long-term prospect for investors, but the Chinese continue to view automobiles more as status symbols than as means of conveyance. To get folks rolling down these roads, China will have to consider investing heavily in a different kind of “infrastructure”–the reduction of costs associated with auto travel.

Paul Midler is the author of the book Poorly Made in China: An Insider’s Account of the Tactics Behind China’s Production Game.

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