What the U.S. Can Learn from China

How the user pay principle is being used to advance infrastructure projects

As the proposed six-year federal highway reauthorization bill dwindles to a three-year bill and a likely death by political expediency, it’s probably worth taking a few moments to ponder China’s unlikely success in building what is now the world’s largest network of intercity expressways.

China’s national network is about 53,000 miles and surpassed the Unite States Interstate Highway system in 2011. For some, this feat is not all that compelling: China has an urban population of 665 million people, more than double than that of the U.S. At its current rate of urbanization, China will need a lot more roads and highways. China, in many ways, is still playing catch up.

But, this does little to diminish this engineering, political and social accomplishment. In 2004, China had just 21,300 miles of expressway; more than half of the current expressway system was built in just the last eight years.

By comparison, the United States began its Interstate construction initiative in 1956. Right out the door, the national network adopted existing roads and tollways, making the system effectively 6 percent complete as soon as then-President Eisenhower inked his signature on the legislation. The program progressed smoothly throughout the 1950s and 1960s so that the Interstate system was half complete by 1965 and nearly three-quarters completed by 1970 according to calculations by transportation consultant Wendell Cox. Those are certainly impressive statistics, and, notably, on par with China’s accomplishment.

But then U.S. Highway construction slowed to a crawl. The next 9,500 miles of roadway took 20 years to complete (and another five to put on the finishing touches on the entire system). In contrast, China added 7,000 miles of expressway in 2011 alone.

Thus, China accelerated the pace of road development while the U.S. experienced a dramatic deceleration. How?

A first blush response might be to simply chalk up China’s success to the Communist Party’s ability to seize land at will. This certainly gives the Chinese government an administrative advantage (although the U.S. could always use eminent domain to seize land for roads as well). But this doesn’t explain why China was a laggard during the nearly four decades of Communist rule prior to its road building boom.

The difference also can’t be explained by size. China’s territory is vast and covers 3.7 million square miles. But the U.S. is equally vast, covering about the same amount of territory. While the U.S. figure includes Alaska, China’s numbers includes large swaths of unpopulated and barren lands in the West and Northwest.

It also can’t be explained largely by patterns of urbanization. The 600-mile distance between the city of Wuhan (population 5.3 million) and Guangzhou (population 13.2 million) is a shorter distance than New York to Chicago. Connecting Beijing in the Northeast with Guangzhou requires about 1,350 road miles, about 100 miles more than connecting Seattle to San Diego and less than the number necessary to connect Washington, D.C. to Miami.

China, however, suffered from one major handicap compared to the US: access to capital.

While China is now the second largest economy in absolute numbers, its per capita income (adjusted for purchasing power) still ranks 90th worldwide, according to the International Monetary Fund. China’s economic development is about the same level as the United States was back in the 1920s. And China’s gross domestic product (GDP) per person is only about 17 percent of that of the U.S.

So, how did a poor country with gargantuan highway needs get these projects done?

The first part of the answer is as straightforward as it is logical: tolls. It didn’t raise taxes. China opted to use direct user fees under the principle that if the road produced benefits the beneficiaries would be willing to pay for them.

The second part is also as logical as it is practical: public-private partnerships. While China had plenty of talented engineers and construction workers, they didn’t necessarily have the expertise to finance, manage and build expressways at the scale necessary to meet the needs of the growing economy. Foreign companies did. The first expressways were built by foreign investors in the 1980s, most notably Hong Kong companies with experience in infrastructure investment and management. At least 20 expressway companies are now listed on stock exchanges in Shanghai, Hong Kong and London.

A third, and perhaps even more important, component of the China strategy was letting the provinces take the lead. Paradoxically, China’s general policy strategy was strikingly similar to the U.S.-the national government mapped out the highways and let the provinces build them.

Congress needs to decide how serious it is about investing in our domestic highway infrastructure. It also needs to recognize that the practical realities of the current fiscal environment sharply limit the ability of the federal government to finance this infrastructure.

China’s experience suggests that the practical path forward-the win-win-is to embrace the user pays principles of highway finance, capture private capital and expertise to build and manage these facilities, and devolve responsibility for the system to the states.

That path, of course, is based on an assumption that Congress really is interested in getting a surface transportation bill done.

Samuel R. Staley, Ph.D., is Managing Director of the DeVoe L. Moore Center at Florida State University and a senior research fellow at Reason Foundation where he directs the foundation’s China Mobility Project.