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No.2, 2008 (General Serial No.26): Audit Investigation Findings on Construction, Operation and Management of Toll Expressways in 18 Cities and Provinc
2008-07-04日   Soure : :

Audit Investigation Findings on Construction, Operation and Management of Toll Expressways in 18 Cities and Provinces

                     (Announced on February 27, 2008)     

According to the relevant provisions prescribed in Audit Law of the People’s Republic of China, the National Audit Office of the People’s Republic of China (CNAO) conducted in 2006 its audit investigation of the construction, operation and management of toll expressways in the 18 following provinces (cities)—Beijing, Hebei, Shanxi, Liaoning, Jilin, Heilongjiang, Shanghai, Jiangsu, Zhejiang, Anhui, Shandong, Henan, Hubei, Guangdong, Chongqing, Sichuan, Yunnan and Shaanxi. 

I. The Overall Situation and Assessment of Toll Expressways

To solve the problem of shortage of funds for building expressways and change the situation in which expressways were unable to meet the needs at that time, the State Council approved in 1984 implementation of the policy “build expressways with loans and repay loans with tolls”, that is, apart from the input of financial funds from governments at different levels or capital funds from enterprises, bank loans or money collected from the society can be used to build expressways (including bridges and tunnels) and after completing the construction of these expressways, reasonable vehicle passage tolls should be charged (shortened as tolls hereafter) so as to repay the aforesaid bank loans and money raised. Since then, the Ministry of Communications and local governments mapped out a series of rules and regulations in succession, standardized both construction and management of toll expressways and transfer of operational authority, made it clear that expressways above the level of Grade 2 (including expressways of Grade 2, ditto) could be built with loans and tolls can be charged after set-up of toll gates on these expressways. According to their management nature these expressways could be classified as expressways whose loans must be repaid by government (as for those built with loans from departments of communications, tolls should be suspended after repayment of these loans) and as managerial expressways (which are built with investment from enterprises, reasonable returns are offered to the aforesaid enterprises even after their investment is recovered). In September 2004, the State Council issued the Rules and Regulations for Managing Toll Expressways, making clearer the policy concerning these expressways.

By the end of 2005, the toll expressways of the aforesaid 18 provinces (cities) had reached a mileage of 133100 kilometers, about 70% of the total mileage of China’s expressways, of which expressways built with loans borrowed by government accounted for 101900 kilometers and managerial expressways 31200 kilometers. Of 4328 toll gates set up in these provinces (cities), each province (city) has 240 toll gates on the average and Guangdong has 342, ranking the first among these provinces (cities). The tolls the 18 provinces (cities) charged totaled RMB 510 billion yuan. The mileage of the toll expressways found in the course of this audit investigation was 86800 kilometers.

Judging from what has been found in the course of the audit investigation, the policy “build expressways with loans and repay loans with tolls” drawn up by the country in a special period has proved correct. The implementation of this policy has played an important role in stepping up construction of expressways across China and promoting social-economic development.

1. Step Up Construction of Expressways.  Implementation of the policy “build expressways with loans and repay loans with tolls” throughout our country since the early 1990s has helped realize a leap-forward development of infrastructural construction of China’s expressways. According to the statistics from the Ministry of Communications, China’s expressway mileage that has increased to 41000 kilometers from zero from 1984 to 2005 ranks the second now in the world. Meanwhile the mileage of Grade 1 and Grade 2 highways has increased to 284700 kilometers from 19000 kilometers while the mileage of ordinary highways reached 1.93 million kilometers from 930000 kilometers. The mileage of expressways, Grade 1 and 2 highways has increased from 2% to 17 % of China’s total mileage. At the same time, setup of road networks as well as highway technical grades has both seen improvement. 95% of expressways, 65% of Grade 1 highways and 49 % of Grade 2 highways investigated in the course of this audit in the 18 provinces (cities) have been built by relying on the aforesaid policy.

2. Promote the Development of Comprehensive System of Communications and Transportation. The speedy development of highway infrastructure and that of expressways in particular have promoted rapid increase of the volume of both road haulage and passenger transport and sped up the development of port, air and water transport service. For instance, a modernized comprehensive system of communications and transport has initially taken shape in the provinces of Hubei, Guangdong, Liaoning, Hebei, Shandong and Jiangsu, whose expressways serve as mainlines, whose modern airports, ports and stations as links and whose advanced system of telecommunications as support. According to the statistics from the Ministry of Communications, the volume of both passenger transport and road haulage in 2005 reached 16.974 billion persons and 13.418 billion tons respectively, accounting for 4.35 times and 16.98 times respectively in 1984.

3. Promote the Development of Local Economic and Bring about Good Social Results. Construction of a number of high graded highways has raised the efficiency of road transport, facilitated people’s trips to other places, improved the investment environment, promoted resource development in the areas along the highways and stepped up all-round social-economic development. Road networks and expressway mainlines covering the whole province have initially taken shape in Zhejiang, Henan, Hubei and Shanxi, making it possible to reach prefectures (cities) from these provincial capitals between two and five hours. The expressway corridors of Jiangsu, Guangdong, Shaanxi, Sichuan and Heilongjiang are gradually turning into “corridors for economic development”, remarkably easing restriction of road transport on economic development. The improvement of road facilities in the provinces (city) of Yunnan, Jilin, Chongqing and Anhui coupled with the fast development of tertiary industry and especially tourism has created more job opportunities.  

By the end of 2005, on the other hand, local governments at different levels stopped charging tolls from 4124 kilometer-long toll expressways, bridges and tunnels whose construction loans were repaid and dismantled 653 toll-gates. Limited as the proportion of the aforesaid toll free expressways is, this action has played an active part in lowering logistic costs and cutting people’s traveling expenses.

It is also found in the course of this audit investigation that there are still some problems related to expressway construction, operation and management due to some incorrect ideas of some local governments and communications departments about expressway development and implementation of the policy “build expressways with loans and repay loans with tolls” coupled with lagging-behind building of relevant managerial statutes. These problems that have affected the implementation of the aforesaid policy need to be solved without delay.

II. Main Audit Investigation Findings

1. Some local governments that put stress on speedy development of expressways but have inadequate financial input have built a number of toll expressways mainly relying on bank loans. As a result, their excessive construction of toll expressways is beyond the reach of their financial resources and natural resource support, thus increasing social service costs and augmenting the risk of debt repayment and resource risk.

a. The size of Toll expressways is too big. Aside from Beijing and Shanghai, 16 provinces (cities) witnessed rapid development of their toll expressways during the period of the 10th Five-Year Plan, with 67% of their newly completed highways above the level of Grade 2 as toll expressways whose mileage totaled 63500 kilometers. By the end of 2005, the toll expressways in the aforesaid 16 provinces (cities) accounted for 54% of the total mileage of their highways above the level of Grade 2, with Yunnan reaching 92%, Sichuan 90%, Heilongjiang 86% and Chongqing 84%. Highways above the level of Grade 2 with better facilities are almost made toll expressways, which fails to conform to our country’s guiding principle “priority should be given to toll-free expressways while properly developing toll expressways in the course of their development”. In fact, this means that part of government’s responsibility for providing public products is shifted onto the society and public.

                                                                                                     

b. The burden of debts is heavy. Of RMB 640 billion yuan—the investment put in building toll expressways in 10 provinces (cities) like Zhejiang during the period of the 10th Five-Year Plan, debt funds such as bank loans were over RMB 470 billion yuan, making up for 73% of the total investment. Of RMB 161.8 billion yuan—the investment put in building expressways in Zhejiang, for example, bank loans were RMB 140 billion yuan, making up for over 85% of the total investment. 5 provinces (cities) like Heilongjiang failed to pay RMB 8.7 billion yuan—project funds for over 260 highways--for 6 to 7 years. As excessive loans that were used in building toll expressways have placed a heavy debt burden on these provinces (cities), the bank loan balance of the 18 provinces (cities) reached over RMB 800 billion yuan by the end of 2005.

c. There is risk of repaying loans for some toll expressways already built. Unlike China’s mainline expressways that have made relatively good results, some local expressways’ rate of utilization is lower expected. Of 17 expressways managed by Jiangsu Communications Company Ltd, for instance, 8 expressways’ average flow of vehicles only reaches 60% of their predicted value for study and the flow of vehicles of Nanjing—Gaochun Expressway reaches only 9%.  In 2005, the actual flow of vehicles of Jin-Chao and Jin-Fu Expressway in Liaoning reached 28% and 18% of their predicted value respectively while toll proceeds of 8 expressways in Shaanxi such as Xi’an-Baoji and Mianxian-Ningqiang reached only 39% of their predicted value. Low rate of assets utilization coupled with heavy debts resulted in the risk of repaying loans for many projects. Between 2001 and 2005, bank loans with their interest paid back by 8 provinces (cities) like Jilin for building expressways was RMB 109 billion yuan while their toll proceeds after maintenance and repair expenses deducted was only RMB 68 billion yuan with a shortage of RMB 41 billion yuan. In 2005, the toll proceeds Jilin got from its expressways whose loans should be repaid after their service costs deducted was RMB 5.88 hundred million yuan, only making up for 45% of RMB 1.315 billion yuan—the loan interest that should be repaid in the same year and therefore it was impossible to pay back the loan principle. As a result, a practice of taking a new loan to repay an old one was adopted in these provinces (cities). Between 2003 and 2005, Shandong that adopted this practice repaid MRB 7.636 billion yuan, accounting for 30% of the principle and interest of its loans. However, 5 provinces failed to repay over RMB 6 billion yuan--their loans overdue while other 8 provinces’ loans of RMB 2.55 billion yuan was stripped as bad debts by banks. In 2004, Sichuan Branch of Construction Bank stripped RMB 1.233 billion yuan for building expressways as bad loans.

d. A large number of land resources were illegally requisitioned or left unused. It is found in the course of this audit investigation that the land requisitioned for 667 toll expressway projects in 17 provinces (cities) like Zhejiang totals 2.72 million mu (1 mu is equal to 1/15 of a hectare), of which 962000 mu is illegally approved, occupied without approval, requisitioned and left unused in the name of building green and service areas, making up for 35 % of all the requisitioned land. By the end of June in 2006, the land illegally requisitioned in Zhejiang for 26 expressway projects that were already completed or still under construction was 7156.99 hectares, of which 3562.89 hectares was not approved by the State Council and 3594.10 hectares was not applied to the State Council for approval. From April 2004 to April 2006, the land Anhui requisitioned for building 5 toll expressways such as Yanjiang and Anjing Expressway was 57000 mu, and the province failed to obtain from the State Council any approval for using this land. The land illegally requisitioned and leased by Communications Bureau of Heilongjiang is 3715 mu, as much as 49 times of 75 mu of land approved for use. The bureau turned a service area along Shuiman Highway into a holiday resort called Orchard Villa with a swimming-pool and a ski run. By the end of 2005, Shanghai Road Administrative Section had 3093 mu of land in possession, of which 2415 mu lay idle. Of land for resettlement related to 6 construction projects on 3rd Ring Road in Chengdu, Sichuan, 4388 mu was sold at a low price to a real estate development enterprise. As the road density of some provinces (cities) exceeds the ceiling of 50 kilometers/100 square kilometers, these provinces continue building more toll expressways, and the principle “compensate the land requisitioned with the same amount of land” was not followed for building most road projects because local governments went beyond their powers in undertaking construction of road projects and requisitioning land. The aforesaid practice of building roads beyond the resources available is detrimental to sustainable development of local economy.   

2. Some local governments and communications departments illegally set up tall gates, increased tolls and postponed toll-charging periods, thus putting a heavy burden on the society.

Proceeding from their own interests, these local governments and departments that make toll expressways a platform for raising money through financing have illegally set up toll gates, increased tolls and freely turned expressways built with bank loans borrowed by government into ones managed by enterprises. On one hand, these enterprises make profits from prolonged toll-charging periods and increased tolls approved by local governments, invest their profits again in other projects assigned by the local governments and meet financial expenses with the aforesaid profits; on the other hand, these local governments can get taxes and revenues from various investment activities like building expressways and proceeds coming from enterprise management. This practice has not only affected implementation and results of the policy concerned, but aggravated the burden on the society.

a. 16 provinces (cities) such as Liaoning and Hubei illegally set up 158 toll gates on 100 expressways (or their sections), and by the end of 2005 these toll gates illegally collected tolls of RMB 14.9 billion yuan. According to the estimates of toll-charging periods and present toll-charging standards, these toll gates will collect tolls of over RMB 19.5 billion yuan. First, 66 toll gates are still at work even no bank loans were used in building their expressways or bank loans used in building them have been repaid. Second, 30 toll gates have been illegally set up on the highways of Grade 3, whose tolls are forbidden according to the state’s regulations. Third, resorting to malpractices like “setting up one major toll gate with many minor ones”, 41 more toll gates have been illegally set up at other places. Fourth, 21 toll gates have been illegally set up for collecting tolls before and when highways are under construction. From 1993 to 2005, for example, the tolls collected by the illegally set-up toll gates on Shenyang Ring Road built only with financial investment totaled RMB 1.229 billion yuan and RMB 2.89 billion yuan will be collected within the toll-charging period already approved. Of RMB 1.78 hundred million yuan—the total investment in building the Yellow River Bridge in Zhengzhou, Henan Province its bank loan was RMB 71 million yuan. Since this bank loan was paid back in 1996 with the tolls collected, tolls of RMB 1.45 billion yuan was still collected illegally and more tolls of RMB 3 billion yuan will be charged within the period approved again by the local government. In the name of developing tourist resources, the financial bureau of Heilongjiang has illegally approved since 2001 of setting up 11 toll gates on 8 highways of Grade 3 leading to tourist attractions and the tolls collected by these gates totaled RMB 31.13 million yuan. No bank loan was used in building Tanghe Bridge in Dingzhou, Hebei on No 107 National Highway, but toll gates have been set up and tolls collected since the completion of the bridge in September 1996. The bridge authority got a bank loan of RMB 900000 yuan in June 2002 and the tolls illegally charged until this audit investigation was RMB 67 million yuan.

b. As a result of increasing their tolls, 7 provinces (cities) like Anhui and Zhejiang collected more tolls of RMB 8.2 billion yuan. First, by increasing their expressway tolls, Anhui and Jiangsu established a special construction fund of RMB 4.14 billion yuan with the extra tolls illegally collected for building other projects. Since December 1998, Anhui Road Administration set a “uniform” toll-charging standard for toll expressways under its administration, thus making the “uniform” toll-charging standard higher than the previous average standard and illegally turning “increased” proceeds into funds for building rural road projects. By the end of 2005, construction funds raised by following this malpractice, excluding normal tolls collected, reached RMB 1.397 billion yuan. Second, to show a better management performance of some of their expressway companies, Zhejiang and Hubei illegally approved ways to increase tolls so that extra tolls of RMB 4.09 billion yuan was collected. Approved by the provincial government of Zhejiang, enterprises managing the province’s expressways started collecting “vehicle number toll” from vehicles running on expressways since 1995 and charged extra tolls of RMB 1.955 billion yuan from 2003 to 2005. The tolls charged for the expressway to the airport in cities of Chengdu, Wuhan and Nanjing is 1.37 times, 1.1 times and 0.42 time higher respectively than that for local highways of the same level. From 2002 to 2005, extra tolls of RMB 1.15 hundred million yuan were collected from the Wuhan’s Airport Expressway. 

c. It is found in the course of sampling 35 managerial expressways of 12 provinces (cities) such as Shandong and Beijing that these roads have become “expensive ones” due to their prolonged period approved for charging tolls and therefore the tolls thus collected are several times and even 10 times higher than their investment costs. According to the periods approved by local governments for toll charging and 2005’s standard for toll charging, a relatively big burden will be put on the society. First, as for toll expressways that can make reasonable service profits and whose loans can be repaid within a relatively short time, 30 years have been approved as the longest period required according to regulations for toll collecting. Second, the expressways that used to make good profits after collecting tolls for many years will be “appearance-changed” and illegally approved with their toll-charging period reevaluated. Third, due to merging debts of other projects into toll expressways, debts thus merged artificially become heavier and toll collecting period illegally prolonged. Take Jinan-Qingdao Expressway with an investment of RMB 3.38 billion yuan for example. 12.65 years is its toll charging period for recovering its investment and making reasonable profits according to the estimate, However, 30 years is its toll charging period approved, and according to the estimate of toll charging standard in 2005, RMB 27.5 billion yuan will be added as social burden. Of RMB 1.165 billion yuan—the total investment for building Capital Airport in Beijing, RMB 0.765 billion yuan is a bank loan. After more than 3 years of toll collecting, the Beijing Municipal Government approved again in January 1997 that 30 years would be the toll collecting period for Capital Airport Expressway. By the end of 2005, the tolls collected amounted to RMB 3.2 billion yuan and it was estimated that RMB 9 billion yuan would be collected during the remaining years of the toll-charging period. In 1999, the Beijing Municipal Government transferred to the newly established Capital Road Development. Co. Ltd. 3 roads built with bank loans borrowed by the government like the Beijing Section of Beijing-Shijiazhuang Expressway after charging tolls for 3 to 12 years, as managerial ones and approved again that the toll charging period for these roads would be 30 years. Of the three roads mentioned above, the toll charging period for the Beijing Section of Beijing-Shijiazhuang Expressway that started toll-charging in 1987 would be 42 years, whose toll proceeds would reach RMB 9.3 billion yuan according to the toll collecting standard in 2005, accounting for 16 times of the bank loan for building this road. Beijing-Tianjin-Tanggu Expressway and Beijing-Tongzhou Expressway have the same problem. By the end of 2005, the Hubei Government turned the bank loan of RMB 12.9 billion yuan for building national and provincial highways, rural roads and other projects into debts borrowed for building toll expressways so that the toll charging period for the expressways concerned was prolonged. While checking the toll charging periods for 47 roads built with bank loans, the Guangdong Municipal Government regarded its financial funds of RMB 2.9 billion yuan as “debts” that should be repaid with tolls.

d. Governments and communications departments of 18 provinces (cities) diverted their toll proceeds of RMB 29.1 billion yuan that should be used as separate items for loan payment to build other road and urban infrastructural projects and pay back other loans and expenses. It is found in the course of sampling the toll gates of 5 toll expressways built with bank loans and 55 highways in Jiangsu that by the end of 2005, the tolls collected totaled RMB 17.4 billion yuan, of which RMB 5.36 billion yuan was diverted to other construction projects. By the end of 2005, tolls collected from the Henan Section of Lian-Huo Expressway and the Xinxiang-Zhengzhou Section of Beijing-Zhuzhou Expressway totaled RMB 9.45 billion yuan, of which RMB 2.55 billion yuan was diverted to other projects. From 2001 to 2005, the Liaoning Provincial Government made its own policy, and according to this policy RMB 7.50 hundred million yuan, making up for 5% to 5.5% of the expressway tolls collected in the province was drawn as expenses for traffic police, traffic and uniform allowances. From 1999 to 2005, the Communication Bureau of Hebei and 3 expressway legal units under it illegally drew from the tolls collected from 5 expressways RMB 6.48 hundred million yuan—more shared funds than stipulated and used them as bonuses and funds for welfare and building staff living quarters and office buildings. Departments like the Financial Bureau of Hebei illegally drew RMB 2.10 hundred million yuan from expressway tolls as expenses for expressway police, government regulation and reemployment funds. By the end of 2005, the tolls collected by 3 toll gates like Zhaodian Bridge Toll Gate of Changzhi City in Shanxi totaled RMB 4.09 hundred million yuan, from which both the municipal and county government diverted RMB 2.73 hundred million yuan to make up for financial expenditure. The fact that a large amount of the tolls collected from expressways built with bank loans have been held back or diverted to other uses resulted in a severe shortage of funds for loan payment. Therefore, some toll expressways that should stop charging tolls continued to do so and the extra tolls they collected totaled RMB several billion yuan. Several more tens of billion yuan will be charged if this malpractice was not corrected, which will bring about a vicious cycle of outstanding loan, toll collection, toll diversion and toll recollection. By the end of September 1999, the net profits (service costs deducted) of the tolls collected from the Chongqing Section of Chengdu-Chongqing Expressway totaled RMB 8.80 hundred million yuan, which was sufficient for the payment of RMB 6.65 hundred million yuan—the principle and interest of the bank loan concerned, and therefore, this toll-charging can be suspended. On the contrary, the local communications department diverted and retained RMB 4.60 hundred million yuan out of the aforesaid profits and illegally approved in the name of loan payment in 1999 toll charging should continue on this road. Extra tolls of RMB 2.6 billion yuan has been collected up to now and more tolls of RMB 10.1 billion yuan will be charged until the toll-charging expiry date. 

3. Irregular is the transfer of managerial authority over some toll expressways.

The following malpractices are found in the course of audit investigating the transfer of road managerial authority over 106 projects in 10 provinces (cities) such as Shandong, Jiangsu and Zhejiang. First, local governments illegally approved by going beyond their powers transfer of road managerial authority over 64 projects, making up for 60% of transferred projects. Of 18 times for transferring managerial authority over 12 highways like Shanghai-Hangzhou Expressways, 12 times were not approved by departments concerned. From 1996 to 2003, without reporting for approval to the Ministry of Communications, the relevant unit of Anhui presumptuously transferred to others the managerial authority over 4 roads like Lian-Huo Expressway which were either built with the financial investment from the state or the mainline national highways, and illegally approved this transfer by means of “breaking up the whole into parts’. Second, bank loans were used as payment of transfer funds. Of RMB 24.3 billion yuan got by some local governments for transferring managerial authority over 18 road projects, RMB 17 billion yuan was bank loans got by the assignees that mortgaged the transferred roads, accounting for 70 % of the transfer funds. Failing to realize the goal of attracting social funds and participating in road construction, this practice makes it possible for some units to take control of roads—huge national assets with minimum risky costs--and make huge profits. By the end of 2005, Zhejiang Province got RMB 12.575 billion yuan by transferring toll-charging authority over 4 projects like Hangzhou Ring Expressway, of which RMB 8.66 billion yuan was bank loans obtained by the assignees that mortgaged their toll charging authority. In 2003, after acquiring 70% of toll charging authority over Xianyang-Yongshou Highway in Shaanxi with the cost of RMB 3.23 hundred million yuan, a private enterprise got a bank loan of RMB 2.94 hundred million yuan by mortgaging its toll charging authority as its investment funds and therefore its actual investment was only RMB 29 million yuan. In June 2005, Chongqing’s Chengyu Expressway. Co. Ltd got a bank loan of RMB 1 billion yuan by leaving its toll charging authority over Chengdu-Chongqing Expressway (the Chongqing Section) as a pledge and the entire loan was divided among its shareholders as the principle and interest of their investment. Third, procedure for managerial authority transfer was against rules.  As some tenders remain only in form, transfer to others without assessment or low-priced transfer caused losses of state assets. For instance, the Anhui Provincial Government illegally lowered the evaluated price of Hefei-Chaohu-Wuhu Expressway, transferred the expressway with a low price, and two years later bought it back illegally with a high price. By doing so it lost RMB 1.24 billion yuan. In 2000, the Jiangsu Provincial Government transferred to a private enterprise part of stock ownership (including toll charging authority) of the Jiangsu Section of Beijing-Shanghai Expressway. While confirming the transfer price, it only took into consideration the expressway’s construction costs and failed to include future proceeds according to relevant regulations. Fourth, some local officials who made use of their powers illegally involved themselves in transferring road managerial authority while some units and individuals sought their personal gains in doing so, causing losses of state assets. As some officials meddled in the process of transferring Wuhan-Huangshi Expressways in Hubei, a foreign businessman made a huge profit of RMB 1. 45 billion yuan.   

4. Outstanding is the management problems with some toll expressways.

Reduction and exemption of tolls randomly enlarged by some local governments and communications departments lead to an outstanding problem of “privilege-offering vehicles” and “favor-giving vehicles”. Some toll expressway managements are overstaffed; their staff members have too high income and their toll proceeds are mainly used as staff expenses.

a. Communications departments of 15 provinces (cities) like Liaoning, Shandong and Chongqing illegally issued to 59000 vehicles “toll-exemption cards’, “service cards” and “toll-reduction cards”, causing an outstanding problem of “privilege-offering vehicles” and “favor-giving vehicles”. Only during the period of 2003 to 2005, RMB 8.40 hundred million yuan were the illegally reduced and exempted tolls some government organizations, communications units and individuals should pay. By the end of 2005, the department in charge of communications in Liaoning distributed against the state regulations and in the name of checking and supervising toll-exemption cards for 9926 vehicles of local governments, people’s congresses and people’s political consultative conferences at different levels as well as road authorities. The communications department of Shandong that made its own policy issued 2654 toll-exemption cards to vehicles of some local governments, party and government organizations as well as communications units, causing the loss of RMB 29.26 million yuan due to the illegally reduced and exempted tolls in 2004 and 2005. In April 2006, it was found in the course of spot-checking the toll-settlement system for Guangdong’s toll expressways that there were 9830 toll-exemption cards. According to the estimate, tolls of RMB 40.72 million were exempted in 2005.

b. Some toll expressway managements are overstaffed and their staff members have too high income. Some local governments fail to set clear standards for the sizes of toll expressway managements and their expenditures while others fail to control and supervise these managements, causing too big a size of staff members working in some toll gates and branches. For instance, the planned number of toll-charging staff of Zhongxiang Bridge maintenance and management station in Jinmen, Hubei should be 30, but the actual number is 144; and the same case is with the toll-charging staff working for Hejin-Longhu Highway in Yuncheng, Shanxi—its planned number is 27 while its actual number is 156. In addition, managements of some toll expressways have too high income.

c. Of proceeds of state stock ownership coming from managerial roads built with the investment of financial funds, that is, proceeds obtained from transferring roads—state-owned assets, RMB 5.8 billion yuan are either left unused or diverted to other purpose rather than being used for road reconstruction or loan payment. Of the aforesaid sum, RMB 1.79 billion yuan were used for construction of buildings and halls, investment in stock, distribution of bonuses and welfare subsidies as well as investment in other fields. For example, at the end of September 2006, Huajian Communication Economic Development Center, which used to be affiliated to the Ministry of Communications and is now under China Merchants Steam Navigation Co. Ltd., gained RMB 2.8 billion yuan — proceeds of state-owned stock of 20 highways, of which sum RMB 1.72 billion yuan lay idle. While building Kunming-Yuqi Highway in Yunnan, the provincial communications bureau made an investment by selling the old roads at the reduced price of RMB 480 million yuan and by June 2006 would get RMB 151 million yuan—its management returns according to investment proportion. However, neither the aforesaid investment nor returns was recorded in the bureau’s account. By the end of 2005, RMB 428 million yuan—the tolls collected from the 4 toll expressways, like Dunhua-Baishishan Expressway, built with the investment from Jilin Provincial Government was all taken by 2 non-state-owned companies in charge of service and management of these expressways. In addition, proceeds from advertisements and service facilities largely relying on toll expressways have not been brought into uniform accounts but transferred elsewhere, or economic entities have been set up so that their staff members could hold and control shares. Only from 2003 to 2005, RMB 610 million yuan was transferred elsewhere or to these economic entities, of this sum RMB 83 million yuan was spent as bonuses and welfare expenses. For instance, RMB 120 million yuan—the whole proceeds from service areas and advertisement business of Hebei’s Beijing-Shijiazhuang Expressway Company lay idle in the management enterprises. By the end of 2005, RMB 109 million yuan--total proceeds from advertisements, service areas and rental of communication pipelines of 13 highways built with government’s bank loans in Shanxi like Daxin Highway was left unused in enterprises.

The following are the main reasons for causing the aforesaid problems. With erroneous thinking about road construction, some local governments and communications departments fail to have a correct understanding of the relationship between road construction, their finance- and resource- bearing capacity and returns of invested projects and work out road development plans that are scientific and rational. They hope to develop road at a high speed but are unwilling to shoulder responsibilities. They have shifted to the society their responsibility and burden and changed the principle “Properly develop toll expressways” into the idea of road development mainly relying on this policy, violating the original intention of the policy “Build roads with loans and repay loans with tolls”. Due to the fact that too great importance is attached to the local interests in terms of management of toll expressways in some provinces and cities, problems like illegally setting up toll gates and charging tolls, prolonging toll-charging periods at random and unreasonably transferring managerial authority remain unsolved despite of repeated checks.

In addition, imperfect rules and regulations pose another outstanding problem. Rules and statutes in coordination with the act Regulations for Managing Toll Expressways have yet to be publicized so that problems like too many toll gates close to one another with too long toll-charging periods of the expressways built before the issuance of the aforesaid document have remained unsolved. Of 284 toll gates on the non-closed toll expressways in Sichuan, the distance of 131 toll gates between each other is too close and the distance of 10 of the aforesaid toll gates between each other is less then 10 kilometers. By the end of 2005, 28 managerial expressways in Guangdong were approved for having their toll-charging period of over 30 years and one of these expressway enjoying 55 years.

III. Audit Recommendations

Before 2020, more high-grade highways will be built in China. In the course of continuing with the implementation of the policy “build roads with loans and repay loans with tolls”, problems demanding prompt solution are to perfect relevant statutes and standardized management as soon as possible so as to effectively realize the policy goal. For this, the CNAO makes the following recommendations. First, the Ministry of Communications and local governments at different levels should pursue our country’s principle on road construction “Priority must be given to developing toll-free expressways while toll expressways should be developed properly”, control the size of toll expressways, augment government input in road construction, reduce social operational costs and give expression to government responsibility. Second, local governments at different levels and their communications departments should earnestly act on scientific approach to development, take into overall consideration their financial conditions, land resources, capacity to repay debts, social burden and future demand, make scientific plans for construction of toll expressways, save land resources. Third, relevant laws, statutes and systems concerning toll expressways should be perfected, expressway’s investment building, and service management and authority-interest transfer standardized. Fourth, proceeding from safeguarding people’s interest and promoting development of a harmonious society, local governments should cut highway tolls, reduce the number of toll gates, readjust irrational toll-charging periods and standardize in earnest the practice of turning roads built with government’s bank loans into managerial roads. Fifth, strengthen the management of toll expressways, make toll income and expenditure as well as operational situation to the public at a fixed period and accept people’s supervision.

IV. Implementation of Audit Recommendations

The CNAO has put forward to provinces (cities) concerned recommendations on correcting and finding a solution to the problems found in audit investigation. According to law it has submitted to judicial and discipline-inspection departments 15 law- and discipline-violating cases and 34 offenders have been ascertained criminal responsibility or rendered punishment for violating party and government disciplines according to law.

The Ministry of Communications, local governments concerned and their departments in charge of communications have attached great importance to the problems found in the course of audit investigation, supervised in earnest correction and solution of these problems so that most of law- and regulation-violating problems have been corrected. The leading Party group of the Ministry of Communications held over 10 ad hoc meetings while the ministry called a nationwide symposium on standardizing management work of toll expressways so as to study and make a plan for correcting and finding solutions to the problems concerned. The ministry made it clear that local governments concerned should pursue the principle “priority should be given to development of toll-free expressways while toll expressways should be developed properly”, strictly control their number of toll expressways and strengthen management of the land used by expressways and monitor of debts. Examination and approval of road authority over toll charging and set-up of toll gates are made clearer in 3 statutes and systems already publicized like Notice of Further Standardizing Toll Expressway Management Work, and work of transferring toll-charging authority over roads built with government’s bank loans has been suspended. Meanwhile 8 regulations and systems will be drawn up such as “Ways to Transfer Authority and Interest of Toll Expressways” and “Working Plan for Gradually Withdrawing and Merging Toll Gates of Grade 2 Highways”. On the other hand, the Ministry of Communications calls for sorting out and correcting problems of “privilege-offering vehicles” and “favor-giving vehicles”.

Main leadership of provincial (municipal) governments concerned have given important instructions many times in dealing with toll expressways’ problems found out in the course of audit investigation and organized without delay departments of development and reform, communications, construction, price and finance to study and work out their respective measures for reform and consolidation:

1. Control the number of toll expressways and augment government investment input in road construction. Most local governments make it clear that they will control their number of toll expressways, study and reform management system of toll expressway construction, augment financial investment in infrastructural construction like road construction and commend government responsibility. The Beijing Municipal Government has decided to invest RMB 8.2 billion yuan in 2006 and 2007 as its capital principle for its project of building new expressways and promised to meet the proportion of project capital stipulated by the state.

2. Correct and solve in an active way problems like illegally setting up toll gates. Provinces like Jiangsu, Henan, Hubei, Shanxi, and Shandong have annulled rules and regulations like “Ways to Manage Shares of Toll Earnings in Excess” and “Toll Earning Used as Capital for New Projects of Road Construction”. Provincial (Municipal) Governments of Chongqing, Zhejiang, Shanxi, Sichuan, Hebei, Guangdong, Yunnan, Jilin, Heilongjiang, Henan, Liaoning, Shaanxi and Anhui study earnestly their respective plan for withdrawing and merging toll gates and their toll gates already suspended and to be suspended total more than 100. Provinces (cities) like Jiangsu, Anhui, Chongqing, Hebei, Jilin, Shaanxi, Henan, Hubei, Shanxi and Shandong are recovering in an active way vehicle tolls that have been held back and diverted to other purpose and have offenders held accountable. Henan, Yunnan and Zhejiang make it clear that they will study again to confirm “the toll-charging period for toll expressways”, and this period will be readjusted in 2007. Provinces like Anhui have abandoned the practice of requisitioning capital for building rural roads by raising toll-charging standard.

Provinces and cities like Beijing, Jiangsu, Zhejiang, Jilin, Hebei, Henan, Shandong Anhui, Chongqing, Yunnan and Heilongjiang lose no time in going through the procedure of land requisition for road projects, and the procedure for over 300.000 mu of land has been completed.  

3. Perfect relevant systems, and standardize transfer of management authority over toll expressways. The provincial government of Anhui and Zejiang has publicized documents, standardized transfer and approval of management authority over toll expressways and improved management system of transfer of managerial authority over toll expressways. According to the aforesaid audit suggestions, provinces like Heilongjiang, Huber, Shandong, Sichuan and Shaanxi are turning the managerial expressways illegally changed from ones built with government’ bank loans into their original form, recovering the toll expressways illegally transferred and restoring government management over them. The Beijing Municipal Government makes it clear that it will put under strict control transfer of managerial authority over expressways and will not approve of toll expressway assets coming into the market.

4. Continue to sort out the problems like “privilege-offering vehicles” and “favor-giving vehicles” and strengthen management of toll expressways. According to the statistics from the Ministry of Communications, local governments have annulled 240000 pieces of “toll-exemption cards” and “toll-reduction cards” of various kinds, corrected tolls of various kinds illegally reduced or exempted totaling 9 million vehicle/times and in 2007 will continue to sort out the problem of “privilege-offering vehicles” and “favor-giving vehicles”, making it the main content for rectifying working style. Henan, Yunnan, Hebei, Shaanxi, Shanxi, Hubei, Shandong, Anhui and Heilongjiang have publicized relevant rules and regulations, brought into its respective accounts ‘earnings from service areas of toll expressways built with government bank loans and advertisement proceeds”, handed over these proceeds as payment of loans and strengthened “management of state earnings from road service and transfer”. Hubei, Shanxi, Anhui, Guangdong, Jilin and Henan are all engaged in reforming expressway toll-charging units, reducing their number of toll-charging management personnel and standardizing expenses of these personnel.