By Megha Rajagopalan and Sui-Lee Wee

BEIJING (Reuters) - One of China's most senior former military officers has confessed to taking "massive" bribes in exchange for help in promotions, state media said on Tuesday, as the government moves closer to his court martial as part of its war on graft.

Xu Caihou retired as vice chairman of the powerful Central Military Commission last year and from the ruling Communist Party's decision-making Politburo in 2012.

President Xi Jinping heads the Central Military Commission, which controls the 2.3 million strong armed forces, the world's largest, and has repeatedly reminded them to be loyal to the party.

Xi has made weeding out corruption in the military a top goal. It comes as Xi steps up efforts to modernise forces that are projecting power across the disputed waters of the East and South China Seas, though it has not fought a war in decades.

Xu, whose graft probe was announced in June, had been stripped of his title and expelled from the military, the official Xinhua news agency said, adding his expulsion from the party had also been formalised.

"The probe by the military prosecutors ascertained that Xu Caihou took advantage of his position to assist the promotion of other people, accepting massive bribes personally and through his family," Xinhua said.

"Xu Caihou has confessed to the crime of taking bribes," it added in a statement released following a key party meeting last week to improve the rule of law.

Military prosecutors had finished their investigation and begun procedures to file the case, Xinhua adding, referring to the court martial which is the next likely legal step.

It provided no other details.

"It's very, very significant because Xu Caihou was in charge of personnel affairs for the military for 13 years," said Bo Zhiyue, an expert on elite Chinese politics at the National University of Singapore's East Asian Institute. "The majority of people who are either current, full generals or retired generals were somewhat promoted by Xu Caihou."

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Xu has been under virtual house arrest for months while helping in a probe into Gu Junshan, who has been under investigation for corruption since he was sacked as deputy director of the logistics department of the People's Liberation Army (PLA) in 2012, sources previously told Reuters.

Gu was charged with corruption earlier this year.

Xu has been under investigation since March 15, state media said in June.

The party leadership had faced a dilemma over whether to prosecute Xu, who is undergoing treatment for bladder cancer, sources have said.

Reuters has not been able to reach either Xu or Gu for comment. It is not clear whether they have lawyers.

The terse Xinhua dispatch made no mention of Gu.

"Xu Caihou is a dead tiger. He was retired. He was also very sick, he was suffering from cancer," said Bo the academic.

"But the fact that he (Xi) got rid of him without getting rid of those people who have been promoted by him, possibly by corruption, by bribes or whatever, that means this is actually not an easy job for Xi Jinping."

The buying and selling of senior jobs in the military, an open secret, has worried reformers who say it leads to those with talent being cast aside and damages morale.

A separate statement released by Xinhua also on Tuesday about last week's party meeting said the government would speed up anti-corruption legislation work so "government officials dare not, cannot and do not want to be corrupt".

Xi has vowed to target high-ranking "tigers" as well as lowly "flies" in a sprawling campaign against corruption.

However, Xinhua made no mention of the graft case against the powerful former domestic security chief, Zhou Yongkang, despite expectations last week's meeting would prompt a new announcement about him, including his expulsion from the party.

China stepped up a crackdown on corruption in the military in the late 1990s, banning the PLA from engaging in business. But the military has been involved in commercial dealings in recent years due to a lack of checks and balances, military analysts have said.

Anti-graft advocates have said corruption in the military is so pervasive that it could undermine China's ability to wage war.

(Writing by Ben Blanchard; Editing by Alex Richardson and Nick Macfie)