The Chinese player was beaten 3-6, 6-2, 6-0, by world No 142 Yaroslava Shvedova.
Li, who defeated Francesca Schiavone in the final last year, looked to be in control of the match in the opening set but the cool and windy conditions did not help her and she succumbed to the greater consistency of Shvedova.
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Shock: Kazakhstan's Yaroslava
Shvedova beat defending champion
Li Na
The Kazakh was a quarter-finalist here two years ago, which helped her to climb inside the top 30 in the rankings, but a knee injury and poor form last year saw her tumble to as low as 257 in the world.
Shvedova next faces either Wimbledon champion Petra Kvitova or American Varvara Lepchenko, while Li's defeat means no former champions are left in the women's draw.
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