The Swedes got off to the worst possible start when Na Zhang sent a piledriver whizzing past keeper Hedvig Lindahl in the sixth minute.
Thomas Dennerby’s side clawed their way back into the game and were rewarded with star striker Lotta Schelin slotted home an equalizer shortly before the break.
But it was not to be Sweden’s day, with Duan Huan snatching a winner for the ‘Steel Roses’ in the 72nd minute.
Wednesday’s other Group E game saw Canada record a 2-1 win over Argentina, Sweden’s next opponents on Saturday.