More Australian corporate borrowers are expected to issue Dim Sum bonds by the middle of next year, Bank of China Ltd said, after the first such offering was made by an Australian state government last week.

The sale by New South Wales, [Company Incorporation USA]the country's biggest regional economy, of 1 billion yuan ($163 million) of securities opens the door for non-financial companies that do business with China, said Shanjun Hu, Australia country head for Bank of China, which managed the transaction with Australia & New Zealand Banking Group Ltd.

"I can imagine in the coming years more and more Australian companies will participate," Hu said in a Nov 20 interview in Sydney. BOC has spoken to potential issuers and the market may develop "very quickly," possibly reaching "hundreds of billions" of yuan over the next few years, he said.

The NSW offering capped a week in which China's President Xi Jinping addressed parliament in the capital Canberra reached a free trade accord with its largest commercial partner and Sydney was named as the world's 12th offshore yuan clearing hub. China is seeking to encourage greater global use of the yuan with borrowers such as the UK Treasury and Caterpillar Inc issuing Dim Sum debt. ANZ and National Australia Bank Ltd. have previously sold such bonds, data compiled by Bloomberg show.

Australian issuers have sold the equivalent of at least $79 billion of notes offshore this year, borrowing in currencies ranging from US dollars and euros to Swiss francs and Japanese yen, according to data compiled by Bloomberg. The nation's domestic market has seen more than A$77 billion ($67 billion) in transactions, excluding Kangaroo sales. Global offshore yuan bond sales reached 394 billion yuan so far this year, up from 280 billion yuan in all of 2013.

The NSW renminbi deal attracted about 1.4 billion yuan of investor interest, with 44 percent of the debt snapped up by Asian buyers and 24 percent going to purchasers in Australia, ANZ said. The issue was priced to yield 2.75 percent, after being marketed at 2.85 percent.

New South Wales Treasury Corp, the state's funding arm, said it plans to revisit the market following last week's sale of one-year notes and will look at larger and longer-tenor transactions as the swap market develops to allow it to bring the funds raised back into Aussie.

"The market is developing and these are just the first steps towards further issues," said Fiona Trigona, Sydney-based head of funding at NSW Treasury Corp. "There is obviously a lot more development that needs to be done."

The formal announcement that Bank of China's Sydney branch would become a yuan clearing bank came after NSW launched its deal, meaning it is being settled through Clearstream and Euroclear rather than in Australia. Trigona said that Australian settlements are likely once full arrangements are in place with the Austraclear system managed by ASX Ltd, which she expects to be sometime next year.

"It is still relatively early days, [Hong Kong Company Registration Guide]but it certainly seems to be a currency that is very much in vogue in terms of investor demand," said Paul White, head of ANZ's global debt syndicate Nov 20. "We have been in discussion with other potential issuers and I would like to think this does kickstart the market."