Chinese President Xi Jinping (2nd L, rear) attends the welcome banquet held by Polish President Andrzej Duda (3rd L, rear) in Warsaw, Poland, on June 20, 2016. [Photo: Xinhua]

Poland is set to become the first European nation to issue yuan-denominated debt in China.

Poland's Ministry of Finance has signed a deal with the Bank of China to issue 3-billion yuan (452 million U.S. dollars) worth of panda bonds on the mainland over the next 3-years.

This follows a visit to Poland by Chinese President Xi Jinping last week.

Panda bonds are yuan-denominated debt sold by foreign countries and overseas agencies in China.

Since their first launch in 2005, more than 30-billion yuan worth of panda bonds have been issued.

Wang Jun with the China Center for International Economic Exchanges says panda bonds are becoming popular for a number of reasons.

"The International Monetary Fund included the Renminbi into its Special Drawing Rights basket of currencies last year, becoming a catalyst for the booming panda bond issuance. The market liquidity in China has remained solid in recent years, with lower bank reserve requirement ratios and interest rates, which has made the Chinese market more competitive in terms of financing costs. For bond issuers, this means more financing channels and optimized financing structures, as well as a diversification of investors."

Analyst Chen Xi with ratings firm China Bond Rating says panda bonds are a good way for the Chinese government to open up the financial market.

"More panda bonds being issued will bring much closer connection between China's financial market and the outside world and during this process, the significance of the Chinese financial market will become more prominent in the world."

The World Bank estimates the panda bond market could surpass 320-billion yuan in the next 5-years.