A key member of China's ruling political faction was named defense minister today, strengthening civilian control of a restive military unhappy with steady budget cuts and official attacks on the late Communist Party chairman Mao Tse-tung.

The appointment of Vice Premier Geng Biao as China's first civilian defense chief is seen as a significant victory for Communist Party Vice Chairman Deng Xiaoping and the team of veteran officials who have run the nation since 1976.

Geng, 72, who has been handling daily affairs of the party's military affairs commission headed by Deng, is considered a loyal follower of Deng's development strategy, which places military modernization lower in priority than several other sectors of the economy.

Eleven other ministers were appointed today in one of the most sweeping reorganizations of the government in recent years.

The appointments were announced at the final session of the standing committee of the National People's Congress, which has been meeting here for the past nine days to review economic policies and confirm ministerial appointments.

Although several new appointees are known to be Deng's allies, none bears the stamp more clearly than Geng, a military commander during China's civil war who later became a diplomat and served as ambassador to several European countries, Pakistan and Burma.

Geng led a high-ranking military delegation to the United States last year and is known as a strong proponent of a modern Army with little sympathy for the revolutionary-war tactics preferred by old-line elements in China's officer corps.

Since Deng began heading the party's military affairs commission several months ago, Geng has played a key behind-the-scenes role in running the military, but inner-party fighting has blocked him from replacing the aged Marshal Xu Xiangqian, who has remained defense chief in name only, according to diplomatic and Chinese sources.

Sources said that conservative officers opposed Geng's appointment in favor of a senior career soldier who could be counted on to fight for large defense budgets and uphold the Army's guerrilla-war traditions first popularized by Mao during the Chinese Communist Party's revolutionary days.

Geng has become identified in military circles with the nationwide campaign to rid China of Maoism and, more practically, with the economic policies that cut military spending, sources said.

In recent weeks military dissent is said to have grown over a decision to slash another $650 million from the 1981 defense budget, according to Chinese sources. This latest cut follows a 13.2 percent reduction in 1980 military spending.

Although Geng has surfaced in recent weeks to give important speeches at the Army's political work conference and at a meeting of the party's military affairs commission, it remained unclear how the logjam blocking his appointment was broken, although analysts speculated that Deng may have gained support for the appointment within the ruling Politburo by capitulating on other ministerial appointments.

Apart from defense minister, the most significant appointment was the naming of Vice Premier Kang Shien as minister of the petroleum industry, replacing the man who was blamed for allowing a 1979 oil rig accident in Bohai Gulf in which 72 people were killed.

Kang, whose duties as vice premier encompassed the nation's petroleum production, was publicly criticized at the time for negligence and covering up the tragedy.

He also is a leading member of a group known in Chinese politics as the petroleum faction, whose central thesis -- that oil production would increase rapidly enough to be exported abroad in exchange for foreign currency to finance China's modernization -- has long since been discredited by diminishing petroleum output.

A second official thought to be part of the petroleum faction, former Peking mayor Lin Hujia, was named agriculture minister, raising questions of a possible comeback by the once influential petroleum group.

Some analysts speculated that the Kang and Lin appointments may have been made as part of an agreement with Deng in which Politburo members with petroleum faction connections would support his choice for defense minister.