Take a look at the example code that comes from KEIL!

/* BLINKY.C - LED Flasher for the Keil MCBx51 Evaluation Board with 80C51 device*/
                  
#include <REG51F.H>

// When you have enabled the option Stop Program Execution with Serial
// Interrupt, the Monitor-51 uses the serial interrupt of the UART.
// It is therefore required to reserve the memory locations for the interrupt
// vector.  You can do this by adding one of the following code lines:

// char code reserve [3] _at_ 0x23;   // when using on-chip UART for communication
// char code reserve [3] _at_  0x3;   // when using off-chip UART for communication

void wait (void)  {                   /* wait function */
  ;                                   /* only to delay for LED flashes */
}

void main (void)  {
  unsigned int i;                     /* Delay var */
  unsigned char j;                    /* LED var */

  while (1) {                         /* Loop forever */
    for (j=0x01; j< 0x80; j<<=1)  {   /* Blink LED 0, 1, 2, 3, 4, 5, 6 */
      P1 = j;                         /* Output to LED Port */
      for (i = 0; i < 10000; i++)  {  /* Delay for 10000 Counts */
       wait ();                       /* call wait function */
      }
    }

    for (j=0x80; j> 0x01; j>>=1)  {   /* Blink LED 6, 5, 4, 3, 2, 1 */
      P1 = j;                         /* Output to LED Port */
      for (i = 0; i < 10000; i++)  {  /* Delay for 10000 Counts */
       wait ();                       /* call wait function */
      }
    }
  }
}
 

There is a delay loop in C! They do not use i (better coding practice)! The code is identical! The only explanation is that the Assembler code does use port 2 to control the LED. The C code the OP provides just masks out all but 2 LEDs, perhaps they are just turning on/off too fast for the eye to see and maybe a scope might come in handy at this point. Another point is that the OPs delay might be too long and takes forever to get to the correct LED to light up.