Governments seek debt reprieve as road tolls cut

Local governments have asked Beijing to relax debt repayments for their highways, the indebtedness of which has caused the central government to slow down road construction.

The China Securities Journal, quoting an unnamed Ministry of Transport official, said many provincial governments had requested that the central government waive interest payments for their second-grade highways after tolls were removed on many of the roads.

The gearing ratio of the nation's expressways (the highest grade highways) had reached 70 per cent, above the 58-per-cent gearing ratio of the country's heavily indebted Ministry of Railways, the paper reported.

'The central government is concerned that the expressway sector will repeat the history of high-speed rail, which had a slowdown in construction due to the ministry's gearing ratio of 58 per cent,' said Nomura analyst Jim Wong.

Guangdong province, for example, had invested a total of 300 billion yuan (HK$369 billion) in highways, but 200 billion yuan of that had not been repaid, said Zheng Tianxiang, a transport professor at Sun Yat-sen University in Guangzhou. 'A lot of roads in Guangdong are losing money and will not be able to repay their debt. Many local governments are suffering from heavy debt.'

Because of the debt burden, the National Development Reform Commission (NDRC) announced it would delay construction of new roads, Wong said.

Many mainland highways are struggling to pay interest on their debt since highway tolls were reduced. The central government is moving to abolish tolls on some highways to offset rising oil costs and improve traffic flow, Wong added.