Tolls collected from Beijing's 16 expressways in 2010 reached 5.7 billion yuan ($882 million)， according to a Beijing Capital Highway Group report cited yesterday by The Beijing News.
Most of China's listed road companies reported a gross profit margin of 50% or more last year, making road construction the most profitable industry in China. Road companies had already overshadowed traditional profit-making industries like real estate and oil production.
All 16 Expressways, except for the Airport Express, the Beijing-Tianjin-Tanggu Express and the Jingtong Express, are controlled by three listed companies and managed by the Beijing Capital Highway Development Group.
Financial reports show that the gross profit margins of the Nanjing-Shanghai Expressway reached 56.21%，the Ganyue Expressway (Jiangxi-Guangdong) 48.81% and the Chengdu-Chongqing Expressway 58.88%.
The profit margins of Beijing road companies were relatively small despite the Capital Highway Development Group, which has a gross profit margin of over 67%.
By contrast, less than 20% of listed Chinese real estate companies posted gross profit margins of 50% last year.
Even the margins of oil monopolies like China National Petroleum and Sinopec Group did not exceed 40%，with each recording 33.79% and 19.55% respectively.
Toll roads create high revenue
The massive construction of China's transportation network started in 1984, when the central government approved a policy allowing the financing of road construction through debt which would be repaid through tolls collected over a specified period.
According to the Ministry of Transport, by the end of 2010 China had 74,100 kilometers of expressway, the second largest amount in the world, compared with just 147 kilometers in 1989.
Some of those routes have become cash cows. The Jingtong Expressway, built in 1996, earned 311 million yuan ($48 million) in 2010 but only costed 100 million yuan ($15 million). That's a profit margin of 67.65%.
In addition, Jingtong received a subsidy of 234 million yuan ($36 million) last year, as policy requires the municipal government to subsidize the expressway for natural damages from January 1, 1998 to December 31, 2017.
Long tolling periods boost profits
According to central government policies, every debt-financed toll road is given a specific concession period to recover its construction costs.
Under Chinese regulations, there are two types of toll roads: government loan roads which can charge fees for up to 15 years, and commercial roads which can charge fees for up to 30 years.
The Beijing-Tianjin-Tanggu Expressway, with an approval to charge tolls for 30 years, had collected 6.6 billion yuan ($1 billion) by 2010 since opening in 1999. With a total gross profit of 3.9 billion yuan ($603 million)， the original 1.4 billion-yuan loan ($217 million) to build the road was paid off long ago.
The company's financial report showed that tolls in 2010 amounted to 720 million yuan ($111 million)， a 5.63% increase from 2009. Even if its annual income remains at 720 million yuan ($111 million)， the route could still eventually collect up to 13 billion yuan ($2 billion).
