The Welshman made a match-high break of 108, but lost the final four frames as he bowed out 5-3.
There was no such trouble for Judd Trump, who breezed through to the last eight in Guangzhou with a dominant 5-1 win over Northern Ireland Open finalist Yan Bingtao.
Selby cleans up to win final frame thriller and punish crucial Higgins error
A day after Bristol's Trump breezed past Jamie Jones 5-2, the former UK champion produced knocks of 51, 83, 111, 55 and 56 boasting an average shot time of only 17 seconds.
Trump will face John Higgins in the quarter-finals on Friday after the four-times world champion overcame fellow Scott Donaldson 5-3 boosted by runs of 51, 53 and 52.
But 2005 world champion Shaun Murphy is out having suffered a 5-3 defeat to Lyu Haotian.
Murphy moved 3-2 clear with a knock of 80, but his opponent reeled off the next three frames, closing with a run of 75 to secure his progress.
CHINA CHAMPIONSHIP LAST 16 RESULTS
- Martin O'Donnell 5-2 Liang Wenbo
- Lyu Haotian 5-3 Shaun Murphy
- Judd Trump 5-1 Yan Bingtao
- Scott Donaldson 3-5 John Higgins
- Mark Selby 5-3 Hossein Vafaei
- Mark King 3-5 Yuan Sijun
- Barry Hawkins 5-2 Graeme Dott
- Zhao Xintong 5-3 Mark Williams
CHINA CHAMPIONSHIP QUARTER-FINALS
- Martin O'Donnell v Lyu Haotian
- Judd Trump v John Higgins
- Mark Selby v Yuan Sijun
- Barry Hawkins v Zhao Xintong
Huge tension as crucial frame 17 goes down to nailbiting final black
Higgins holds slender advantage over Selby in China Championship final
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