Morgan Stanley is bullish on China's bond market, the investment bank's regional head said at the annual Boao Forum for Asia on Sunday.

More work ought to be done to streamline regulations and attract foreign investors, according to Sun Wei, co-CEO of Morgan Stanley in Asia Pacific.

"The opening up of the bond market is crucial for the renminbi's internationalization," Wu Xiaoqiu, vice-president of Renmin University of China, said on the sideline of the forum, adding that offshore renminbi needs more diversified investment channels.

Foreign participation in China's capital market now only takes up about three percent, and increasing such participation would help promote market transparency, Sun noted.

The discussion comes as the government plans to set up a bond market trading link between the mainland and Hong Kong later this year to further open the market.

The link will allow overseas investors to buy and trade bonds in the Chinese mainland market while offering mainland investors access to the bond market in Hong Kong.