Wednesday, 19 January 2011

China announces new national toll policy

The People's Republic of China has been rapidly building a nationwide motorway network funded by manually collected tolls. However, it has been largely driven at the provincial and city levels, with the national government in Beijing having less of a role than might otherwise be thought.

The official People’s Daily has reported
comments from Vice Minister of Transport Weng Mengyong. Tolls are to be used for national motorways and highways, but secondary networks are not to be tolled.

Already tolls on secondary routes are being removed:

More than 90,000 kilometers of second-class highways financed by government loans in 17 provinces, municipalities and autonomous regions had stopped charging toll fees by the end of last year. In addition, 1,723 tollgates were closed during the period, Ministry of Transport figures released on Tuesday showed.”

What this suggests is a political move to assuage concern about high tolls on roads that most motorists use, and also that Chinese governments at all levels are not lacking the capital to pay for roads.

In addition, regulations will be set to avoid issues such as harsh penalties for failure to pay tolls. A recent case saw a man in Henan Province get life imprisonment for evading US$550,000 worth of tolls (which begs the question as to whether this man has spent his life driving on toll roads!).

However, even the tolls for motorways look like being underpriced:

Charges will remain low - just enough to pay for the roads' operation and maintenance, Weng said.

That doesn’t mean recovering the long run capital costs of the roads, but also a bigger concern must be congestion. For the next few years, this wont be an issue, except in major cities, but it does raise the real prospect of China missing an opportunity to use pricing to sustainably maintain high standards of service on its networks.  The lessons of many other countries could be applied in China to the country's advantage.

Secondary routes in China need maintenance too, and heavier vehicles clearly create exponentially higher proportions of road wear compared to cars. Tolling done intelligently can recover those costs efficiently. However, the biggest gains for China in using tolls are in managing demand by charging for congestion (which also means roads are not being underpriced compared to railways), which also sends signals about investment in more infrastructure. In addition, managing congestion helps manage pollution, and tolls can be used to incentivise lower emission vehicles.

I've been to China twice, I've seen the first class networks that have been built, but also the chronic congestion in and around Beijing, and the likely trajectory for China in road infrastructure is for things to become completely unsustainable in the next 10-15 years.  Safety, congestion, pollution and maintaining high standards of service are all the challenges faced today, which will only increase.

In short, China should be congratulated for using tolls so extensively to help build up a first rate highway network, but it needs to apply more sophisticated economics and transport policies to ensure the network remains first rate, and to manage the pressures and demands growth will impose upon it in the next few decades. I fear that scaling back tolls, to address short term local concerns about prices, will be a mistake, at a time when many other countries see road pricing as a way of optimising the management and use of their networks.

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