On Nov.29 the Asian Infrastructure Investment Bank (AIIB) announced its approval of a sovereign-backed financing of the Hubei Global Cargo Logistics Project, valued at $400 million. One of the most expensive projects that the AIIB has agreed to support in 2024, its main objective is to facilitate cross-border trade as well as improving air fright logistics in the Hubei region of central China. The approval of this project is not just further proof that the Belt and Road Initiative (BRI) is maintaining its momentum, but serves as a testament to China's commitment to changing the narrative around its environmental impact.
Founded 10 years ago to support the projects within the BRI framework, the AIIB has strongly supported infrastructural projects in Asia and beyond, paying particular attention to support eco-friendly development. In 2021 the bank pledged to align their operations with the goals of the Paris Agreement by July of 2023 and estimates that by 2030 their cumulate climate finance approval would reach $50 billion. One of the most prominent ways in which the AIIB concretely supports sustainable development is helping its clients to develop infrastructure projects designed to handle the future impacts of climate change: upgrading water infrastructure to reduce water loss, improving energy efficiency as well as expanding drainage systems are all examples of "climate proofing".
From a strategic standpoint, the project marks a significant step forward in Xi Jinping's quest to turn the Enzhou Huahu airport into the country's most efficient hub for overseas operations. The airport, which began operations in July 2022, is China's first cargo-focused airport a. Located on the eastern side of the Hubei province, it is equidistant from Shanghai, Beijing, and Guangzhou, and just an hour drive from Wuhan, a key location of the Belt and Road Initiative. The airport was developed by the Hubei province in collaboration with SF Express, China's largest courier and logistics company. In recent years, Hubei has made considerable progress in improving its logistics infrastructure. The province is located along the Beijing-Guangzhou Railway, the country's longest high-speed railway and largest railway network and it's intersected by most of Mainland China's expressways, with over 6.000 km of operational expressways connecting all its cities.
The construction of the 134.9-hectare bonded logistics park adjacent to the airport will begin in January 2025 and it's predicted to be completed by December of 2029 with a total cost of $528.88 million (China is providing counterpart funding). Once completed, the Hubei Global Air Logistics Hub is expected to benefit a wide range of stakeholder involved in foreign trade, including companies engaged in international trade, import /export activities and logistics operations, by streamlining import/export procedures and concentrating trade activities. The project is also anticipated to generate significant employment opportunities across various sectors, including warehousing, transportation, customs, administration, and maintenance, thus contributing to local job creation. Additionally, customs authorities and trade facilitation agencies are expected to experience enhanced efficiencies in customs clearance operations. The project received approval from the AIIB Board of Directors just one year after its initial review in September 2023. While the relatively swift approval, despite the need for a substantial loan, may seem solely linked to China's dominant voting power within the bank's weighted system, the reason behind the expedited decision is the project's alignment with AIIB's strategic priorities. The project focuses on enhancing connectivity and regional cooperation, it will be both climate-resistant and low-carbon, and integrates digitalization into its design. These goals align with the bank's corporate strategy of prioritizing sustainability, and technology-enabled infrastructure.
The project consists of four key components. The first focuses on customs operations and bonded facilities, providing infrastructure for efficient customs clearance, import/export channels, and bonded processing and warehousing. This includes customs inspection areas, checkpoints, bonded workshops, warehouses, truck ramps, and elevated platforms. The second component addresses trade and freight service facilities, with the construction of a duty-free service center and a general administration building to accommodate trading companies and offices. The third component aims to establish a low-carbon, smart, and resilient logistics hub by installing photovoltaic power systems, low-carbon smart operation systems, and smart port platforms. Finally, the fourth component, capacity building, focuses on training future operational staff in low-carbon operations, digitization, climate adaptation, and environmental and social monitoring. It aims to strengthen project management and oversight capabilities while achieving internationally recognized green building certifications. Once completed the park is expected to attract over 600,000 tons of international air freight.
According to Konstantin Limitovskiy, AIIB Vice President for Investment Clients Region 2 and Acting Director General of the project, "By prioritizing sustainable design and operational efficiency, the Hubei Global Air Cargo Logistics Project is set to become a benchmark for green infrastructure in the region. With globally recognized green building certifications for all warehouses, this project exemplifies how innovation and sustainability can drive economic and environmental value." The AIIB has however recognized that the project will have a considerable amount of environmental impact in its realization, as well as presenting a certain amount of risk: the project has been categorized as Category A, which means that the project is likely to have a significant adverse environmental impact. The Environmental and Social Impacts Assessment (ESIA) indicates that the project is situated in a habitat largely altered by human activities, meaning it is unlikely to have significant impacts on biodiversity. During construction, potential environmental effects include dust, air emissions, noise, soil erosion, wastewater, solid waste, and traffic disruptions. However, these impacts are temporary, localized, and can be effectively mitigated through the management practices outlined in the project's plan. In the operational phase, potential issues may include exhaust gases, waste liquids, hazardous waste, noise, and road safety concerns but an emergency plan is also in place for managing hazardous materials. It's worth noting that all the entities involved in the realization of the project, Hubei Province and the Ezhou Linkong Group Co., will have to ensure that the project is carried out in accordance with the ESIA, as well as ensuring that Green Building Certification Standards are met and that Climate Resilient Measures are implemented, since these are all key covenants of the loan granted by the AIIB.
This project is not only a major development for China but will also impact key international air cargo shipping routes. "By optimizing the logistics network of the Yangtze River Economic Belt, we aim to attract global aviation and logistics enterprises, foster regional integration, and drive collaborative innovation. With AIIB's support in comprehensive planning, green and low-carbon design, and climate resilience measures, we are setting a benchmark for sustainable logistics development and positioning Ezhou as a gateway for international trade in Hubei Province," said Xuezhi Wei, Assistant General Manager of Ezhou Linkong Group Co. If the project is successfully implemented, it will further demonstrate that, although China's Belt and Road Initiative may not be making headlines as it once did, the BRI continues to progress and remains committed to green infrastructure development.