BEIJING, JUNE 28 -- Chinese Communist Party leaders clashed over whether to allow dissident astrophysicist Fang Lizhi and his wife to leave the country earlier this week, with senior leader Deng Xiaoping arguing decisively in favor of the move, according to a well-placed Beijing source.

The source said hard-line members of the party's ruling Politburo and policy-making Central Committee argued strongly against letting Fang go free, charging that he is an anti-Communist agitator who helped organize last year's student-led democracy movement and would attack the party from abroad. Fang has denied involvement in the movement.

Others in the party leadership opposed a Sino-American agreement allowing Fang to leave the diplomatic sanctuary of the U.S. Embassy in Beijing, the source said, because they did not want to give the impression that China was bowing to pressure from the United States. Yang Baibing, the Chinese army's chief political commissar and brother of President Yang Shangkun, was described as one of the last holdouts against the agreement.

Fang and his wife, physicist Li Shuxian, arrived Tuesday in Britain, where Fang is to take up an appointment at Cambridge University. The couple left Beijing after living for more than a year at the U.S. Embassy, a development that exacerbated U.S.-China tensions.

The policy debate over the release showed that the 85-year-old Deng, while ostensibly retired, is still a crucial arbiter in important matters of state.

In arguing for Fang's release, Deng made the case that sanctions imposed by Western nations and Japan to protest last June's brutal army crackdown on democracy demonstrators in Beijing have been damaging to China -- something Beijing has never publicly acknowledged, the source said.

While the timing of Fang's release indicates China's desire to influence the July summit of major industrialized nations in Houston -- where an easing of the sanctions will be considered -- Deng's position on Fang suggests that he has broader considerations and shows, according to one diplomat, that he is still a pragmatist despite his opposition to dissent.

Deng, who initiated China's opening to the outside world and its economic reforms in the late 1970s, has through the decades thought consistently in strategic terms and is believed to have been uncomfortable with the tensions that have entered the Sino-American relationship.

Western diplomats said that in order to argue for Fang's release, Deng had to overcome personal animosity toward the dissident, who had enraged the leadership by publicly accusing party leaders and their children of profiting from corruption.

Another source, a Chinese government official, said Deng made an appeal to President Bush for understanding of China's situation through Egyptian President Hosni Mubarak during the Egyptian leader's visit here in mid-May.

The official said Mubarak had discussed China with Bush by telephone before leaving for Beijing and that Bush told Mubarak he wanted to continue to develop relations with China. Deng is reported to have told Mubarak, "You're friends with Bush, and I'm friends with Bush, too."

The official said the Chinese leader praised Bush's performance as a president and politician and stated that he understood Bush's stance on China. But the official said Deng asked Mubarak to warn Bush that the situations in China and Eastern Europe -- where Communist governments were overthrown last year -- are entirely different.

"China has more than a billion people . . . and if China becomes unstable, it will threaten Asia and the world," Deng was quoted as saying. "If Bush is an international politician, he should understand our efforts to maintain stability," Deng said.

During the policy debate, according to the first source, Deng was able to produce figures on the decline of the Chinese economy to support the decision to allow Fang and Li to leave the country. Officially, the government has said the sanctions "will not work."

An unpublicized, internal report prepared recently by the World Bank supported the position Deng took, saying that foreign investment in China decreased sharply following the crackdown.

"Applications from foreign investors, which had been on a rising curve . . . are estimated to have declined by 75 percent after June 1989," said the World Bank report, obtained by diplomats in Beijing. "The June event essentially closed off China's access to medium- and long-term borrowing from the international market," it said.

Information about high-level Communist Party debates over such sensitive issues is tightly held and in most cases can only be obtained from Chinese sources with access to party documents or briefings. The sources who discussed the leadership's debate over Fang requested anonymity.

Meanwhile, the Chinese government official said that in addition to the high-level opposition in the party to freeing Fang, there was criticism at lower levels as well.

The official said a Communist Party document distributed Monday to the leaders of government, party and military organizations throughout the country, argued that Fang's release would benefit China's international position. The document appeared to be designed partly to counter criticism and to put the best face on the release.

The official quoted the document as saying that the United States "guaranteed that it would not provide Fang and Li with the environment and conditions to engage in anti-China activities."

But a U.S. Embassy spokesman denied that Washington offered such guarantees. "That is categorically not accurate," said the spokesman when asked if Washington had promised to restrict Fang's political activities.

"We couldn't do that," the spokesman said. "We wouldn't do it."

According to the Chinese official, the document called the situation in China "stable," and said it was an appropriate time for the couple to be released. But at the same time, the document stated that the party must remain "on the alert for enemies inside and outside of China," according to the official.