The Reagan administration withdrew a $10 million grant to the U.N. Fund for Population Activities yesterday and cast all future funding in doubt because of UNFPA's involvement in China's family planning program, which the administration said involves coercive abortion.

The Agency for International Development said it found that the U.N. agency -- funding family planning efforts in 140 countries -- was involved in China's one-child-per-family program.

AID set tough conditions on future funding of UNFPA, suggesting that China should "punish" program abuses or the UNFPA should "radically" change its assistance to the Chinese program.

In a telephone interview yesterday, AID Administrator M. Peter McPherson conceded that the United States support for UNFPA next year was in doubt. "It will take a dramatic change in the way UNFPA does its business in China" to restore U.S. support, he said.

The United States is the single largest contributor to UNFPA, providing about 25 percent of its budget. In this fiscal year, its contribution -- before the $10 million withdrawal -- was $46 million.

The decision to withdraw the $10 million and donate the money to family planning programs in other developing countries was immediately attacked by UNFPA executive director Rafael M. Salas, who described it as a violation of the $46 million pledge.

"UNFPA does not support abortion or coercion. Its program in China is in substantial compliance with U.S. law," said Salas, referring to an AID report in April that appeared to clear the U.N. agency.

Chinese officials in New York would not comment yesterday, saying they needed time to digest the AID ruling.

In July, on the eve of his visit to the United States, Chinese President Li Xiannian said reports of infanticide and forced abortion were a "total distortion and fabrication," while other senior Chinese officials wrote asking Secretary of State George P. Shultz to use his influence "to prevent this state of affairs from getting worse so as to avoid any damage to Sino-U.S. relations."

Shultz, however, delegated the decision to McPherson following an intense debate within the State Department. Sources there said the debate reflected a sensitive balancing act, weighing Chinese sensitivities against the threat of an assault from antiabortion activists.

Antiabortion groups yesterday welcomed the AID decision. "The administration has sent a strong message to the Chinese government, which forces millions of women to submit to abortion that is repugnant to American people. In our view the UNFPA should never receive another dollar from the United States so long as UNFPA in any way supports the brutal Chinese population program," said Douglas Johnson, a spokesman for Natural Right to Life.

The Chinese government, in an effort to limit a population of more than one billion -- 22 percent of mankind -- began in 1979 to limit each couple to a single child. While the policy has lowered the birth rate, it relies heavily on coercion to control family size.

The Washington Post, in a series of articles this year, reported that the Chinese program resulted in forced abortion, involuntary sterilization and widespread killing of female infants. Chinese traditionally prefer male children.

According to Chinese officials, 53 million fetuses were aborted between 1979 and 1984, many in the last three months of pregnancy. Many abortions and sterilizations were carried out against the mother's wishes, according to numerous interviews in China.

McPherson said that the administration was eager to retain strong relations with China. The UNFPA decision reflected tough wording drawn up by Congress in its supplemental appropriations bill for 1985 barring the government from funding organizations that "support coercive abortion programs or participate in their management."

In a statement, AID said that it could provide assistance to UNFPA on two conditions:

"If China does, in fact, punish abuse and thereby prevent coercive abortion and involuntary sterlization or if, consistent with U.S. legislation, . . . UNFPA were to radically change its assistance to the China program such as by supplying only contraceptives."

AID said that redirecting the money "reflects the administration's policy to provide substantial support for voluntary family planning but firm opposition to abortion and coercive population control practices."