Due to an ongoing metro project, cracks have appeared on the walls of homes in Qingpu District. (Photo : www.scmp.com)
The Chinese government is set to make major repayments of the loans it had incurred for the construction of over 70,000 kilometers of highways in the past decade, the Southern Weekly reported.
According to the report, China has been building highways since 2005, extending the network by more than 70,000 kms to 111,950 kms, to become the world's longest highway network.
A 2014 government report, however, showed that the outstanding debts related to the building and operation of the roads had grown by an annual 12.1 percent to 3.85 trillion yuan ($600 billion).
The report said that due to the heavy debt burden, the government was prompted to introduce a bill on June 30, removing the ceiling on the period for which a highway remains a toll road.
Licensed operators who manage highways were given the maximum period of 30 years, which can be extended depending on factors such as the size of the investments and the estimated cost recovery time, the report said.
Over the past three decades, local governments in China consider road construction as an indicator of their performance and a measure of development, the report added.
Government data showed that construction of highways peaked in the country in 2011, with over 70 percent of the funds obtained through loans.
According to the Ministry of Transport, local governments and highway operators are often given a five-year grace period to build traffic volume on the roads, and repayments on road construction loans often peak five years after the completion of the project.
Wang Tai, deputy head of the national highway authorities, told Southern Weekly that the total interest on outstanding debts in 2014 reached 231 billion yuan ($36.1 billion).
The report said that the Shandong local government is spending over 20 billion yuan ($3.13 billion) a year on repayments of loans for highway construction while building around 2,000 kms of new highways.
In 2013, Shandong extended the toll period and the highway tolls have now become a major source of funding for the province's ongoing road construction projects.
Some highway operators who face heavy debts have expanded outside their core business to gain profits, in sectors such as property and financial services.
The report cited Anhui Expressway that earned 2 percent of its profits from its pawnshop business, while Dongguan Development Holdings, the parent company of the highway operator in Dongguan in Guangdong Province, earned 12 percent of its profits from its leasing business.
