LONDON, Sept 22 (Reuters) - Morgan Stanley has hiked the chance of China being added to one of the world's top government bond indexes later this week to 90% after the country made some additional improvements to its market practices and plumbing.

FTSE Russell, which runs the World Government Bond Index (WGBI), a benchmark for an estimated $2 trillion in cash, is due to announce a decision during its annual index review scheduled for September 24.

Morgan Stanley last week put the chance of China's inclusion at 60%-70% but raised it on Tuesday after Beijing allowed more flexible settlement of trades, including scrapping the need for Japanese investors to make paper submissions in the widely-used Bond Connect system.

"This is a material improvement to bond access, in our view, and increases the chances of WGBI inclusion on September 24 significantly," the bank's strategist Min Dai said.

Inclusion would give China a 5.7% weight in the high-profile WGBI based on current estimates, just behind Germany at 6% and compared to 33.8% for the United States and 16.7%, 8.2% and 7.3% for Japan, France and Italy respectively.

The actual inclusion will happen in September 2021 with a 20-month phase-in. Morgan Stanley estimates it could help funnel $60-$90 billion of investment money into the country in the next few years and $3 trillion over the next decade. (Reporting by Marc Jones, Editing by William Maclean)