2012-03-11

Struggling governments turn to toll roads to raise funds

Toll roads turn into cash cow (收费公路变成地方“摇钱树”)

China's indebted local governments have been told to put the brakes on highway construction and repay their debts. In addition to repaying the road loans, local governments are also looking for cash now that land sales have slowed. The result is rapidly rising tolls.

Many China bulls point to the infrastructure when bears point to the over investment. But the bears and bulls alike often miss the costs of the debt. Leaving aside a potential default, China's debt service costs are rising and putting a strain on the economy. As the article points out (Google Translate):
The toll road to the above problems, leading to the rise in the cost of logistics: China logistics costs account for about 18% of GDP, 80 percent higher than in developed countries, including tolls accounted for one-third of the cost of transportation, causing people dissatisfied.
Too much debt is a problem, even if it isn't totally wasted. Overpaying for something is a cost; it can be delayed and diverted, but it always must be paid.

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