GTHT released a research report stating that expressway traffic demand remains resilient, with stable and predictable dividends, making the sector a preferred choice for yield-seeking investors. The introduction of national-level policies for expressway expansion and upgrading is imminent, with several provinces having already implemented local-level pilot policies in recent years. Listed companies generally have expansion and upgrade projects underway. The firm anticipates that revisions to the "Regulations" are on the horizon, and these local pilots may guide the optimization of national policies. The implementation of relevant revisions is expected to systematically mitigate reinvestment risks. GTHT's key views are as follows:
The introduction of national-level policies for expressway expansion and upgrading is urgent, with delays in such projects already being a consensus. The "Toll Road Management Regulations" issued in 2004 effectively supported the rapid construction of China's highway network. However, facing construction demands and the needs for expansion, upgrading, and maintenance over the next decade, pressures from reinvestment and local debt risks have become prominent, making policy optimization urgent. This is especially true for national-level expansion and upgrade policies, which are yet to be introduced. Draft revisions of the "Regulations" were released in 2013, 2015, and 2018, with broad industry consensus on key amendments. Notably, all three drafts added the provision that "expansion and upgrading projects may have their operating periods re-evaluated," though specific management measures require further refinement. In recent years, multiple provinces have introduced local-level policies to guide pilot projects for expansion and upgrading. On one hand, the current "Regulations" do not address expansion and upgrading, so local policies meet regional needs without conflicting with higher-level laws. On the other hand, these local pilots will accumulate practical experience, potentially guiding the optimization and nationwide implementation of national policies.
In recent years, several provinces have implemented local-level pilot policies for expressway expansion and upgrading, actively exploring specific management measures. 1) Guangdong: As the earliest and largest province in expressway construction, it trialed the first local special policy, the "Guangdong Province Expressway Expansion and Upgrading Management Measures," in 2015. A 2025 revision reaffirmed that expansion and upgrading projects may have their toll periods and standards re-evaluated. 2) Sichuan: At the end of 2020, it issued the "Sichuan Province Expressway Vehicle Toll Pricing Measures," clarifying that expansion and upgrading projects may have their toll periods and standards re-evaluated. The toll period extension follows the "reasonable return" principle, with toll standards determined on a case-by-case basis ("one road, one assessment") and subject to caps, while franchise operations comply with higher-level laws. 3) Jiangsu: In 2021, it issued the "Jiangsu Province Expressway Toll Standard Pricing Mechanism," establishing the new principle of "user-pays." Expansion and upgrading projects may adjust tolls based on unit investment increments, subject to caps. 4) Ningxia: In 2025, it issued the "Ningxia Hui Autonomous Region Expressway Vehicle Toll Pricing Measures," specifying that expansion and upgrading projects are treated as new projects for unified pricing management. This means toll standards can be increased progressively based on unit investment, subject to caps. Additionally, provinces like Henan, Yunnan, and Xinjiang have clarified in recent revisions to local expressway regulations and related policy measures that expansion and upgrading projects may have their toll periods re-evaluated.
Five major trends in local-level expansion and upgrade policies warrant attention, as they may guide the optimization of national-level policies. Summarizing the local policies from multiple provinces, the firm identifies five important trends that may influence future national policy optimization and subsequent nationwide implementation. 1) Expansion and upgrading projects may not only have their toll periods re-evaluated but also their toll standards reassessed. 2) Such projects may be treated similarly to new projects, applying the same principles and management measures. 3) Principle: The fundamental "reasonable return" principle is maintained. 4) Toll Period: Re-evaluated, with franchise projects adhering to the 2024 revised "Measures for the Administration of Infrastructure and Public Utility Franchises," which extend the franchise period from 30 to 40 years. Projects with large investment scales and long payback periods may be further extended appropriately. 5) Toll Standards: Determined on a case-by-case basis ("one road, one assessment"), referencing unit investment for tiered adjustments with caps, as many provinces require not exceeding the current local standard上限.
Risk warnings: Industry policy revisions may fall short of expectations; economic volatility risks; changes in market sentiment.
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