The rising cost of borrowed money and heavy debt from new construction is putting the squeeze on mainland expressway firms, which are likely to push more assets into their listed subsidiaries to ease the burden.
'Our parent company is highly geared and faces substantial borrowing pressure. There is intensifying pressure to repay existing loans but at the same time they are conducting new construction programmes,' said a source at Hong Kong-listed Zhejiang Expressway, adding the provincial government owned about 56 per cent of the listed company.
Analysts said similar scenarios were playing out at many government expressway companies because they had borrowed heavily to pay for expansion and that debt had become more costly to maintain as interest rates had risen.
The central bank raised interest rates six times last year to cool the economy, putting the key one-year lending rate at 7.47 per cent. And there may be more to come, with Fitch Ratings recommending a 50 basis point rise to control inflation and cut excessive borrowing.
'Given the rising interest rate environment we're expecting parent companies in particular, which are generally quite highly geared, to be very willing to sell assets to ease the burden on their own balance sheets,' said Henry Wu, an analyst at UBS.
China did not build its first modern expressway until 1988, but by the end of last year it boasted 53,600km of expressway, the world's second longest after the United States.
