The 17-year-old, who created a flutter yesterday by beating Olympic champion Li Xuerui in the quarterfinals, lost 10-21 21-14 19-21 to home favourite Yanjiao in an hour and six minutes.
The first game lasted just 14 minutes and Sindhu was thoroughly outplayed with Yanjiao reeling off seven consecutive points to clinch the initiative.
There weren't too many smashes or delicate net volleys on display in the opening game as the two players relied on each other's errors to score.
In the second game, Sindhu roared back by taking a 6-0 lead first up. It was a marked change from the first game as Sindhu seemed more confident in her stroke-play whether it was the baseline or closer to the net.
The Indian took 23 minutes to eventually prevail 21-14, which included five smashes and an equal number of winners from the net.