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The world no 1's game collapsed in the 2nd set and she was repeatedly left stranded by Pennetta's repertoire of lobs.
Defending champion Caroline Wozniacki suffered a humiliating 3-6 6-0 7-6 defeat in the China Open quarter-finals as Italian Flavia Pennetta ran rampant on Friday.
The world number one's game collapsed in the second set and she was repeatedly left stranded by Pennetta's repertoire of lobs, volleys and powerful baseline returns.
Facing match point, Wozniacki staged a dramatic comeback to force a tie break in the third set but Pennetta superbly lobbed the flat-footed Dane to seal the match.
"I knew that it was going to be tough. I did my best today; it just wasn't good enough. I had my chances and didn't take them," said Wozniacki, who had been the only top-10 women's player left in the event. "Of course it's disappointing right now.
"I had 6-5, 30-love (in the third set) and I should have closed the match off. But...Flavia played some good points at that time, and I just made a few wrong decisions and the match changed," added the 21-year-old.
Men's top seed Jo-Wilfried Tsonga powered past Spain's Juan Carlos Ferrero 6-3 6-4 to set up a semi-final clash with third seed Czech Tomas Berdych.
Former women's world number one Ana Ivanovic became the latest high-profile player to exit the tournament when the Serbian retired from her quarter-final against Agnieszka Radwanska with back problems.
The 23-year-old was a set down when the injury she sustained last week in Tokyo flared up.
Maria Sharapova and Serena Williams pulled out of the competition a week ago, Victoria Azarenka failed to show for her match on Thursday due to injury while home hope Li Na exited in the first round, Sam Stosur went out in the second and Vera Zvonareva the third.
Djokovic out
In the men's draw, world number one and 2010 champion Novak Djokovic was also forced to pull out because of a back injury.
Ivanovic said she had been fighting a losing battle all week. "I have had lots of treatments on the injury, but it hasn't got much better," she said. "I've been fighting it the whole week. I had an MRI here yesterday. The doctors are still looking at the results.
"I'm talking to physios and just making sure about the next steps to see what's wrong and what's going on. It's too early to say anything."
Romanian Monica Niculescu came from behind to beat Maria Kirilenko 3-6 6-3 6-4 to clinch a semi-final berth while in the men's quarter-finals Croatian Marin Cilic beat South African Kevin Anderson 7-6 4-6 6-1 and Berdych thrashed Spaniard Fernando Verdasco 6-1 6-0.
Frenchman Tsonga predicted a battle of wills in Saturday's showdown against world number 10 Berdych.
"I'm really happy. Tomorrow will be exciting for sure as we both have a lot to win to be safe for the Masters Final (in London)," said the world number seven. "Both of us will play our best tennis to win the match."
Ivan Ljubicic also reached the last four with a 7-6 6-7 6-2 win over Mikhail Youzhny.
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