Last updated 0100 hrs IST, Friday, February 23, 2001
ASIA FILE The speed revolution China is today ranked third in the world expressway league, says Barun Roy Speed is the name of the game in today's China. Shanghai has just signed a contract to buy the world's first commercial magnetic levitation train from Germany that will ferry passengers to and from its new international airport at Pudong at 250 miles per hour. A 1,200-mile high-speed train will soon link Shanghai and Beijing, reducing travel time between the two cities from 14 hours at present to six. And now, a 200-km highway is being built between Nanjing in Jiangsu province and Hangzhou in Zhejiang to allow the distance to be crossed in two hours, instead of seven. In fact, nowhere is China's obsession with speed better reflected than in the development of its highways and expressways. This development is nothing short of dramatic - one may rightfully call it a revolution - and is being pursued almost with a religious zeal to keep the country moving faster and faster. Highway building is a top priority in China, and a massive national trunk highway system, comprising some 35,000 km, is now under construction. Expressway building is an even greater priority. In just 12 years since the completion of its first expressway in 1988, China has built more than 16,000 km of four to six-lane expressways, and has come to be ranked third in the world expressway league. Another 10,000 km are to be added to the network in the next ten years. By the end of 2010, seven expressways will span the country from east to west and five from north to south, turning it into a huge, integrated economic zone. Investments will run into tens of billions of dollars. An estimated $120 billion will be required in the next five years alone, which, clearly, is beyond the resources of the public sector. The government is convinced that the private sector must be involved to support a programme of such a magnitude. The Highway Law of 1998 makes its intention quite clear. Since that law came into effect, virtually all new and many existing highways have been tolled, fulfilling an essential condition that private investors require. So far, China has mainly used the cooperative joint venture model to induce private financing. Under this model, the foreign investor, in the early years of a highway's operation, receives a higher percentage of the cash flow. When its equity investment is fully paid off, the share tapers off. Some provincial highway companies have listed shares in Hong Kong and Shenzhen on the strength of revenue-producing highway assets. But the build-operate-transfer (BOT) route appears increasingly attractive to the government, following its positive experience with this mechanism in a number of power and water projects. An 80-km section of the 200-km Nanjing-Hangzhou highway, now under construction, has been chosen as the first road project where the BOT concept will be applied on a pilot basis. The segment is marked for development as an access-controlled, mostly six-lane expressway, and the financing requirement is $422 million in the form of both debt and equity. The authorities foresee no problem in getting private financiers to take up the project, given its many favourable aspects. The highway forms part of the national trunk system and falls within one of China's highest-income and fastest-developing provinces, Zhejiang. It will be tolled. When the corridor opens in 2005, a daily flow of 25,000 vehicles is projected, and the volume is expected to grow in the initial years at 8 per cent a year. A 25-year concession will be offered, including a three-year construction period beginning 2002, and a special financial feasibility study projects a 23 per cent economic internal rate of return. Nobody doubts the experiment will succeed as investor interest in China remains exceptionally high. Direct foreign investment already utilised in the country has passed $330 billion. Last October, the international oil giant Shell signed a $4.05 billion contract with Chinese partners to jointly invest in a petrochemical project, China's largest joint venture so far.
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