The US team made several blunders, culminating in team captain Alicia Sacramone landing her second pass of the floor exercises flat on her back.
Hers was not the only mistake though, as teammate Shawn Johnson - the reigning all-around and floor world champion - stepped out of bounds on floor, as did American Nastia Liukin.
By then the gold was China's for the taking, with Deng Linlin, Jiang Yuyuan and Cheng Fei playing their parts to virtual perfection, egged on by a vocal home crowd in Beijing’s National Indoor Stadium.
With eight teams in the finals, China and the United States were paired together for Wednesday's showdown as they went through the four women's apparatus, going head-to-head for the Olympic title.
They began on the vault, an apparatus seen as a strength for a Chinese team featuring world champion Cheng Fei.
Cheng managed a 16.0 but US star Shawn Johnson matched her and the United States took a 0.6 point lead into the second round.
He Kexhin's routine put China in the lead at the midway point, but disaster struck in the next round when Cheng Fei fell off the balance beam and received just 15.15.
That mistake gave the US team containing Nastia Liukin, the world champion on the beam, the chance to establish a decisive lead - but they blew it when Alicia Sacramone fell off attempting a jumping mount and received 15.1.
Later strong performances from China's Deng Linlin and Jiang Yuyuan meant Cheng needed just 13.075 to secure the gold and make amends for her slip up on the beam.