Problem Analysis and Suggestion for Chinese Highway Projects Financed by State Corporations

In China, road had been developed with fiscal budget until 1988. From then on highway projects were allowed to be built via the use of loan by state corporations. Although foreign companies are permitted to invest in highway projects since 1995 and domestic private companies are also encouraged to fund for highway projects since 2001, most of highway projects in China have been developed and managed by state corporations. In practice, problems occurred in many highway projects financed by state corporations. The paper explored and classified these problems by case studies. These problems mainly focuses on defective project planning and improper government intervention, which include: inaccurate traffic volume forecast and premature construction, lack of reasonable toll pricing and adjustment mechanism, lack of planning of reasonable toll duration, excessive government obligation, lack of strict financial supervision of toll revenue, lack of effective administrative supervision, direct authorization of concession right to state company and inexperience of regulation on concessionary projects. The investigation revealed that the basic reason of these highway projects lies on the imperfect current administration system of highway projects in China, i.e., the executive and supervisory of development and operation of highway projects has not been separated clearly. Therefore, the authors propose that the imperfect legal framework shall be also amended and the government shall separate the affiliation between the competent highway authorities and state highway corporation.