A quiet revolution is unfolding on China’s vast network of expressways. After decades where the norm was to extend toll collection periods well beyond their official deadlines, a growing number of provincial and municipal governments are now actively allowing, or even engineering, the cancellation of highway tolls. From Hunan to Sichuan, Guangdong to Hubei, the once-unthinkable act of relinquishing a stable, lucrative revenue stream is becoming a strategic tool for urban development. This pivot from viewing highways as cash cows to treating them as public goods marks a profound shift in China’s urban economic strategy, prioritizing long-term growth and competitiveness over immediate fiscal balance. The trend of cancellation of highway tolls offers a critical lens into how local governments are recalculating the value of infrastructure in a slowing economy, betting that the benefits of reduced logistics costs and enhanced business environments will far outweigh the lost income.
The Traditional Model: Why Tolls Were Extended, Not Ended
To understand the significance of the current trend toward the cancellation of highway tolls, one must first appreciate the powerful inertia of the old system. For years, the dominant narrative was one of延期收费 (yánqī shōufèi) – the extension of toll collection.
The “Loan-Repayment” Imperative and Creative Accounting
The core of China’s expressway boom was the 贷款修路、收费还贷 (dàikuǎn xiū lù, shōufèi huán dài) model – “build roads with loans, repay loans with tolls.” This model fueled the world’s most rapid highway expansion but created a long-term dependency on toll revenue. Regulations set maximum收费期限 (shōufèi qīxiàn) – toll collection periods – typically 15-30 years depending on the road’s classification and region. However, a common loophole emerged: if the loans were not fully repaid by the deadline, tolls could continue. Furthermore, many operators undertook 改扩建 (gǎi kuò jiàn) – rebuilding or expansion projects – which could legally reset the toll clock, classifying the upgraded road as a “new” asset.
Examples of this practice were widespread:
- The Xi’an Ring Expressway (西安绕城高速), whose toll period was repeatedly extended past its 2020 expiry, citing debt repayment needs.
- In Shandong, the provincial government in 2014 uniformly extended the收费年限 (shōufèi niánxiàn) – toll collection年限 – for 15 highway sections, including the Dongqing Expressway (东青高速).
- Major arteries like the Beijing-Shijiazhuang Expressway (京石高速) and the Jiqing Expressway (济青高速) gained new 20-25 year收费期限 (shōufèi qīxiàn) after reconstruction.
This approach, while often legally justified, eroded public trust and was seen as a breach of the implicit social contract. It treated highways as perpetual revenue generators rather than temporary financing mechanisms for public infrastructure.
The Fiscal Reality: Tolls as a “Cash Cow”
Resistance to the cancellation of highway tolls was not merely bureaucratic; it was deeply financial. Many highways, particularly those in economically vibrant regions, were immensely profitable. The now-free Guangzhou North Ring Expressway (广州北环高速), with a peak daily traffic flow of 520,000 vehicles, was estimated to have generated nearly 1 billion yuan annually. The Guangfo Expressway (广佛高速), which stopped charging in 2022, reported net profits of around 2 billion yuan as recently as 2020. For local governments and state-owned operators facing fiscal pressures, relinquishing such income was a hard sell.
The New Calculus: Why Cities Are Now Choosing Free
The recent wave of decisions represents a fundamental re-evaluation. Cities are beginning to view the cancellation of highway tolls not as a loss, but as a strategic investment in their economic future.
Case Study: The Pioneering Examples
The trend is gaining momentum with high-profile examples:
- October 2024: The Changyong Expressway (长永高速), Hunan’s first highway opened in 1993, ceased tolls after 31 years.
- September 2025: Sichuan announced the Chengmian Expressway (成绵高速) and Chengdu North Exit Expressway (成都城北出口高速) would stop charging.
- March 2024: The Guangzhou North Ring Expressway (广州北环高速) became free, completing the free circulation of the entire Guangzhou Ring Road.
- December 2022: Hubei’s first expressway, the Wuhuang Expressway (武黄高速), ended toll collection.
These are not backwater roads. They are critical arteries in some of China’s most dynamic economic regions. Their shift to free status signals a priority on fluidity and accessibility over direct revenue extraction.
Shenzhen’s Masterclass in Long-Term Thinking
The city of Shenzhen provided a blueprint for proactive policy over a decade ago. Instead of waiting for toll periods to expire, it strategically “bought back” highways to open them early:
- 2014: Shenzhen spent 2.7 billion yuan to “redeem” the Meiguan Expressway (梅观高速), then still within its收费期限 (shōufèi qīxiàn).
- 2016: The city invested 13 billion yuan to repurchase sections of the Longda (龙大高速), Nanguang (南光高速), Yanpai (盐排高速), and Yanba (盐坝高速) expressways.
The rationale was brilliantly economic. Officials calculated that while the Meiguan Expressway might have collected 3 billion yuan in future tolls, removing the barrier would increase the value of land within 500 meters of the route by an estimated 30 billion yuan. This calculus—sacrificing millions in annual toll revenue to unlock billions in land value appreciation and lower business costs—exemplifies the advanced urban governance now being emulated elsewhere.
The Economic Rationale: Beyond the Balance Sheet
The driving force behind the cancellation of highway tolls is a sophisticated understanding of modern urban competitiveness. It’s an investment in intangible capital.
Supercharging the Business Environment
For businesses, especially in logistics, manufacturing, and retail, highway tolls are a direct and variable cost. Their removal acts as an across-the-board tax cut, improving profit margins and making a city or region more attractive for investment. As Professor Lin Jiang (林江) of Sun Yat-sen University’s Lingnan College noted regarding Guangzhou’s move, it is “a major move to optimize the city’s business environment and enhance the city’s brand效能 (xiàonéng) – efficacy.” It signals that the government is willing to forgo its own income to reduce the cost of doing business, a powerful message to both domestic and international firms.
Integrating Regions and Enhancing Livability
Physically and psychologically, toll plazas create friction. Their removal integrates metropolitan areas more seamlessly, facilitating labor mobility, shortening commute times, and creating more unified regional economies (like the Greater Bay Area or Chengdu-Chongqing economic circle). For residents, it directly reduces living costs and improves quality of life, which in turn aids in talent attraction and retention. The reputational dividend of keeping a public promise—ending tolls as originally stated—builds valuable social capital and trust in local government.
Broader Implications for China’s Economy and Investors
This shift dovetails with several key national policy priorities, making the trend of cancellation of highway tolls more than just a local phenomenon.
Aligning with National “Internal Circulation” Strategy
China’s dual circulation strategy, with its emphasis on strengthening the domestic market (内循环, nèi xúnhuán), requires reducing frictions in the flow of goods and people. High logistics costs are a major barrier. The proactive cancellation of highway tolls by local governments directly supports this national goal by making domestic supply chains more efficient and competitive. It is a tangible step towards building a “unified national market.”
Investment and Sectoral Shifts
For investors, this trend has clear implications:
- Negative for Pure Toll Road Operators: Companies reliant on stable, long-term toll income may face pressure on earnings and valuations if the policy trend accelerates. Scrutiny of their concession agreements and government relationships will intensify.
- Positive for Logistics and E-commerce: Firms like SF Express, JD Logistics, and a vast array of manufacturers stand to benefit from permanently lower transportation costs, potentially boosting margins.
- Positive for Regional Development: Cities and provinces that move early to eliminate tolls could see an acceleration in economic integration and attract a disproportionate share of new investment. Monitoring local government announcements on infrastructure policy becomes a key part of regional investment analysis.
- Focus on Alternative Models: Attention may shift to how local governments will finance future infrastructure. Could this accelerate Public-Private Partnership (PPP) models with different risk-sharing, or a greater reliance on municipal bonds? The National Development and Reform Commission (国家发展和改革委员会) and Ministry of Finance’s future guidelines will be critical.
The Road Ahead: Challenges and the New Benchmark for Cities
While the direction is clear, the path to widespread cancellation of highway tolls is fraught with challenges, primarily financial.
The Debt Overhang and Fiscal Constraints
Many local governments and their financing vehicles carry significant debt, much of it tied to infrastructure projects. The loss of a predictable revenue stream, even if economically rational in the long run, creates acute short-term budget pressures. The central government may need to provide clearer guidance, potential fiscal transfers, or debt restructuring mechanisms to support localities that choose to end tolls but are saddled with unpaid liabilities from the original construction. The resolution of this tension will determine the pace of the trend.
Setting a New Standard for Urban Governance
The actions of cities like Shenzhen, Guangzhou, Changsha, and Chengdu are establishing a new benchmark. As Professor Lin Jiang implied, a city’s approach to its highway tolls has become a visible indicator of its governance philosophy and commitment to a pro-growth, pro-business environment. In the competition for talent and capital, the decision to honor toll deadlines or buy back concessions may become a differentiating factor, pressuring peer cities to follow suit or risk being perceived as short-sighted or extractive.
The sound of toll booths falling silent across China is more than a convenience for drivers; it is the sound of a maturing economic model. The move towards the cancellation of highway tolls signifies a strategic pivot from infrastructure-as-revenue-source to infrastructure-as-growth-platform. It acknowledges that the highest return on investment for a road is not the cash collected at its gates, but the economic activity it unleashes across the region it connects. While fiscal realities will ensure a gradual and uneven transition, the precedent is set. Cities that master this long-term calculus, sacrificing the certainty of toll income for the dynamic gains of improved logistics, enhanced competitiveness, and greater public trust, are likely to be the winners in China’s next phase of urban development. For investors and analysts, watching which local governments have the vision and fiscal ingenuity to pull this off will provide crucial insights into China’s most promising regional economies. The era of the perpetual toll road is ending; the race to build the most connected, cost-competitive, and business-friendly city is accelerating.