The smoldering border conflict between Vietnam and Cambodia appears to be edging toward a full-scale confrontation as the two Communist neighbors engage in battles along their border in the Parrot's Beak area.

A Cambodian spokesman claimed today that Cambodian forces have contained an invading force, which allegedly involved several Vietnamese divisions. Hanoi, while calling for negotiations, acknowledged that it had retaliated against earlier incursions of Cambodian forces into Vietnam and alleged atrocities committed by Cambodian soldiers against Vietnamese civilians.

Diplomatic speculation and rumors spread by the two sides, however, raised the prospects that their principal rival patrons - the Soviet Union and China may be engaged in a new Indochina conflict by proxy.

The irony seems to be that the Cambodian and Vietnamese Communist regimes, which emerged victorious from the long Indochina war against France and then te United States, were fighting each other to a great extend with American weapons supplied to the predecessor regimes that they defeated.

Apart from Cambodian and Vietnamese radio broadcasts monitored here, there was no independent information about the size of forces involved or the precise location of the conflict.

But refugees fleeing from the troubled border area into Thailand reported artillery exchanges over the past few weeks. Moreover, both Cambodian and Vietnamese refugees have said that frontier skirmishes date back to the end of Indochina's war in April 1975.

The sudden upsurge in fighting last month and the breakup of diplomatic relations between Cambodian and Vietnam last week dealt a major blow to the image of unity in Communist Indochina less than three years after the American withdrawal from the area.

A long tradition of hostility exists between the two countries. But since 1975, Vietnam has remained firmly in the Soviet ideological camp while Cambodia, although it adopted a self-imposed diplomatic isolation, has had China as its principal foreign supporter.

There were unconfirmed reports today that in a sizeable number of Chinese advisers were assisting the Cambodian armed forces.

"Democratic Cambodian," a radio broadcast from Phnom Penh, the Cambodian capital, said today, "absolutely refuses to negotiate under threat or coercion by the aggressor Vietnamese force. There is only one solution for the aggressor Vietnamese forces - they must be totally exterminated."

A Hanoi radio broadcast today repeated charges made earlier that the Cambodian forces had violated Vietnamese territory, "looting, burning dwon houses, schools and pagodas, chopping up people, killing children in the presence of their parents, taking up livers, cutting up stomachs and taking out fetuses from mothers' wombs and, in some places, rounding up people and butchering all of them."

These charges were echoed here by Cambodian refugees who reported atrocities by Cambodian forces committed against the Cambodian population.

Vietnamese refugees who escaped from Phuquoc, a Vietnamese island 20 miles off the Cambodian coast, reported that their homes were shelled on Dec. 18. There were also reports of Cambodian air raids carried out by propeller-driven T-28 aircraft.

The next morning, according to the refugees, the Vietnamese brought in reinforcements and anti-aircraft guns by an American landing craft.

Vietnamese refugees from the twon of Hatien, on the mainland, said they were ordered to evacuate the town last April after Cambodian 122-mm rockets crashed into the market place.

The Vietnamese Communists, a refugee, Nguyen Him Oanh, 26, recalled this weekend, "moved us about nine miles along the road east of Hatien. Then we had to dig bunkers and bomb shelters."

"Every day I saw North Vietnamese soldiers going to the border in trucks. There were tanks and artillery, too. Just before I escaped I saw the bodies of about 20 Khmer Rouge (Cambodians) laid out along the road . . . a display to show us they were killing Cambodians."

The main battle site is farther inland, in the salient of Cambodian territory jutting into Vietnam and known as the Parrot's Beak. It is about 60 miles away from Ho Chi Minh City, as Saigon is now called.

According to Thai military sources, the Vietnamese force, estimated to comprise six divisions, was believed to have penetrated the Parrot's Beak as far as the town of Svayrieng.

In 1970, the United States mounted an incursion into the Parrot's Beak area seeking to cut Vietnamese Communist supply and infiltration routes in the salient.

The Cambodian ambassador in Peking has charged that the Vietnamese invasion of the fertile region was precipitated by Vietnam's economic difficulties and food shortages and that Vietnam's immediate aim was to loot rice and livestock.

The long-term aim of Vietnam, according to the Cambodians, is to annex parts of Cambodia's territory.

According to Western military estimates, Vietnam maintains an army of 25 divisions with some 600,000 well-equipped soldiers. It is backed by more than 1,000 tanks and an air force that includes more than 300 Soviet-made fighters and fighter-bombers and an unspecified number of U.S.-made F-5 fighters, A-37 light bombers and helicopters captured when South Vietnam collapsed.

Cambodia's army has less than 100,000 soldiers virtually no tanks, about 300 artillery pieces and about 20 aircraft, most of them converted U.S.-made T-28 trainers.