Gu has been under shuanggui - the secretive form of administrative detention imposed on party members suspected of corruption - since early 2012.

"Xu was interrogated after the army's anti-graft investigators started their probe of Gu, but he escaped military discipline after he was diagnosed with terminal bladder cancer," the senior colonel said.

Xu was made vice-chairman of the commission, the body that commands the armed forces and is currently headed by Xi, in 2004. He remained in the position until retiring last year.

The senior colonel expressed disappointment that Xu was not punished. "When Xu was taken away for investigation, many mid-ranking cadres like me were very happy. We believed at the time that Xu would be 'the biggest tiger' that would be caught in the massive anti-graft campaign," he said. "We were very disappointed to learn that Xu was exempt [from prosecution] because of his illness."

The sources said they were told the investigation of Xu was dropped after he handed over his ill-gotten gains and that his terminal cancer "equates with the death penalty".

"But from our point of view, we don't know why Xi didn't use the chance to punish him to please the public and the army," the senior colonel said.

The other source, from the PLA's Academy of Military Sciences, confirmed that Xu had been diagnosed with terminal bladder cancer, saying that "Xu won't have to worry about any more investigations".

"If Xu were punished, it will help the army rebuild its public image," the senior colonel said.

Gu, who was in charge of the military's extensive property portfolio, reportedly received bribes worth at least 8.6 billion yuan (HK$10.9 billion) in cash and gifts.

Sun Sijing, head of the anti-graft watchdog overseeing the army's general logistics department, confirmed Gu was being investigated and that details about the investigation would be announced soon.