While Chinese highway companies continue to expand business, their high debt conditions are becoming increasingly conspicuous.

According to the China Economic Weekly, the total length of China's highways totaled 76,000 kilometers by the end of 2010, compared with only 16,300 kilometers of highways before the 10th Five-Year Plan (2001-2005) period. Rapid highway expansion was a priority at the time as part of a wider 4-trillion-yuan economic stimulus package.

The magazine said China plans to build another 79,000 kilometers in the next ten years.

However, agencies have concerns regarding the highway companies' high debt risk caused by quick expansion, the magazine said.

On July 8, China Cheng Xin International Credit Rating Co Ltd changed the rating for the outlook of the toll highway sector from "steady" to "negative" because the highway companies have difficulties in paying short-term debts.

In the same month, Citi Bank released a report saying that toll highways have high investment costs and downgraded most highway stocks' ratings.

The magazine quoted a June report of the National Audit Office as saying that about 1.12 trillion yuan in debt incurred by local governments were used for building highways. Some regions' highways are in the early stages of development and revenue cannot pay their debts and interests, so highway companies chose to get into new debts.

The Yunnan Highway, a project in southwest China, can no longer find financing or pay the principal on its debt totaling almost 100 billion yuan in loans from a dozen Chinese banks including China Construction Bank, China Development Bank and Industrial and Commercial Bank of China, the magazine said.

The magazine said that the debt of 19 listed highway companies exceeded 100 billion yuan, and the Henan Zhongyuan Expressway Co Ltd was burdened with the highest pressure with an debt ratio of 77.72 percent and debt of about 22 billion yuan in the first quarter of 2011.

Large highway companies will put money earned from good projects into new ones to expand business and run into huge debts, the magazine cited an insider, who declined to be named, as saying.