Analysis of Operational Challenges in China's Expressway Sector

Currently, the expressway industry is experiencing severe operational challenges.

As critical national infrastructure, expressways facilitate personnel and logistics connectivity across regions. They form an essential component of China's modern infrastructure network, bridging urban-rural divides, integrating regional economies, and ensuring smooth logistics. The operational efficiency of expressways directly impacts regional socioeconomic integration and significantly influences logistics costs and resource allocation efficiency. Over 75% of national freight turnover relies on expressways, making them vital for industrial and supply chain stability. However, the sector now faces three acute challenges:

Structural imbalance between rising construction/maintenance costs and stagnant revenue growth;

Financial deterioration due to high debt burdens and low repayment capacity;

Institutional conflicts between public-service obligations and market-oriented operations.

For instance, expressway construction costs in one western province reached ¥300 million/km, while toll rate growth averaged below 5% annually. Consequently, the industry's average debt-to-asset ratio exceeds 60%, with some provinces breaching international debt warning thresholds. This severe revenue-expenditure mismatch threatens sustainable infrastructure development and poses systemic financial risks. A granular analysis of costs, revenue streams, policy environments, and regional disparities is imperative to provide theoretical and policy solutions for improving transport infrastructure financing and establishing a modern circulation system under new development paradigms.

I. Current Operations and Cost Structure of China's Expressways

(I) Infrastructure Scale and Network Effects

China's expressway network spans 190,000 km (2024), covering 98.8% of cities with populations exceeding 200,000. One central-western province exemplifies strong network effects: its expressway density leads the region, enabling 0.5-hour intra-city, 1-hour southern Sichuan, and 2-hour Chengdu-Chongqing connectivity, significantly boosting regional economic synergy. National highway fixed-asset investment reached ¥2.82 trillion in 2023 (56% for highways). For example, Chengdu's "2-Ring-11-Radial" network cost ~¥100 billion for 950 km, achieving a density of 6.6 km/100 km². Such massive investments drive mounting debts.

(II) Operating Cost Composition

Construction Costs: Highly variable by geography. Eastern regions face high land compensation (e.g., 30%+ for Shanghai-Hangzhou-Ningbo Expressway upgrades), while western mountainous areas incur elevated tunnel/bridge expenses (e.g., ¥300 million/km for extra-long tunnels).

Maintenance Costs: Routine upkeep, repairs, and cleaning constitute 41% of operating expenses. Labor (toll collectors, maintenance staff) accounts for 51%.

Financing Costs: Industry debt-to-asset ratio >60%, with some provinces exceeding repayment warning lines.

Hidden Costs:

Debt Risks: Average repayment ratios surpass thresholds; western provinces rely on fiscal subsidies.

Congestion Costs: Peak-hour delays in eastern regions incur time-value losses.

Rising costs, debt burdens, and revenue shortfalls demand cost optimization, institutional reforms, and regional coordination to ensure sustainable operations.

II. Macro-Environmental Impacts on Expressway Operations

(I) Policy Constraints: Rigid Regulation vs. Fiscal Pressure

Toll Policies:

Inflexible rate adjustments (requiring 3–5-year approval cycles) fail to reflect construction costs/inflation (e.g., eastern rates frozen at ¥0.5/km for passenger vehicles).

Holiday toll waivers reduce annual revenue by billions (e.g., 50% traffic surges during Spring Festival/National Day increase maintenance/congestion costs).

Fiscal Support Erosion:

Reduced capital requirements (25%→15%) spur debt financing (e.g., >80% debt reliance in western projects).

Inadequate subsidies shift repayment burdens to operators, heightening refinancing risks.

(II) Economic Pressures: Demand Contraction & Competition

Macroeconomic Slowdown: Freight growth below pre-pandemic levels reduces truck toll revenue. Regional disparities emerge: eastern networks saturate while western routes operate below capacity (e.g., 30–50% under utilization).

Competitive Shifts:

High-speed rail diverts short-medium distance passengers (e.g., Beijing-Shanghai line reducing expressway traffic).

Upgraded national highways lure freight vehicles from tolled expressways.

(III) Societal Changes: Rising Expectations & Environmental Compliance

Public Demands:

Controversy over uniform toll rates in low-income western regions.

Demand for improved services (EV charging, disability access) despite high ETC coverage.

Environmental Compliance Costs:

Carbon standards raising maintenance expenses (e.g., costly asphalt recycling).

Ecological restoration fees inflating construction budgets (e.g., 15%+ in mountain routes).

III. Revenue-Expenditure Imbalance and Regional Disparities

(I) Revenue Bottlenecks: Rigid Pricing & Traffic Imbalance

Toll rates remain internationally mid-range but lag cost inflation. Eastern passenger rates (¥0.5/km) exceed western rates (¥0.3–0.4/km), yet adjustments require 3–5-year approvals. Western networks suffer low traffic but high costs; eastern corridors face congestion and overcapacity, diverting traffic to free highways. Freight shifts to rail/waterways further reduce revenue.

(II) Expenditure Rigidity: Surging Maintenance & Tech Costs

Overhaul expenses exceed ¥10 million/km as early expressways enter major repair cycles.

Smart-expressway tech (5G, vehicle-road coordination) and green retrofits escalate costs.

(III) Regional Dichotomy: Eastern Scale vs. Western Debt

East: High traffic but costly land/upgrades (e.g., Shanghai-Hangzhou-Ningbo's land-acquisition burdens).

West: "High-cost–low-traffic–high-debt" trap (e.g., debt exceeding provincial GDP, minimal subsidy coverage).

IV. Pathways to Resolve Challenges

(I) Cost Optimization: Lifecycle Management

Construction: Adopt BOT+EPC models to cut costs via integrated planning (e.g., eastern projects reducing/km expenses). Use recycled materials to lower maintenance (e.g., asphalt extending repair cycles).

Operations: Full ETC coverage reduces staffing; solar-powered service areas cut energy costs.

(II) Institutional Reform: Market-Policy Synergy

Dynamic tolling (e.g., off-peak truck discounts/night tariffs); extend toll periods to 30 years.

Launch expressway REITs to fund new projects; mixed-ownership reforms for service areas.

Refinance high-interest debt via low-rate bonds.

(III) Regional Coordination: Cross-Province & Industry Integration

Nationwide toll integration eliminates provincial border checkpoints, boosting efficiency.

Develop logistics parks/service area commerce to raise non-toll revenue (e.g., 30% income growth in central provinces).

V. Conclusion

China's expressway crisis stems from cost-revenue imbalances under macro-policy constraints and traffic volatility, characterized by high construction/debt burdens and revenue stagnation. Eastern challenges center on land costs and congestion; western regions face low-traffic debt traps. Solutions require:

Lifecycle cost control (BOT+EPC, recycled materials)

Market-policy synergy (dynamic pricing, REITs, debt restructuring)

Regional-industrial integration (networked tolling, service-area economies)

These measures can establish a sustainable, public-service-oriented model aligned with China's development needs.