Rybakina went into the WTA 1000 event high on confidence after winning the US Open and taking the No 1 ranking from Aryna Sabalenka in New York.
It all seemed to be going to plan for the 27-year-old after taking the first set against the world No 118 on Saturday.
However, the Armenian arguably played the match of her life to secure a comeback victory in Beijing.
Rybakina was forced to miss the Billie Jean King Cup Finals due to an ongoing Achilles tendon injury late last month, but she seemed to be coping fine in the opening set.
However, the former Wimbledon champion suffered a bit of unwanted history as Charaeva became the lowest-ranked player to secure a comeback win against a world No 1 in more than 50 years.
Rybakina's second round loss has now left the top half of the draw wide open. Brit Sonay Kartal, who has a Protected Ranking as she comes back from injury, will face Charaeva in round three, with the winner taking on wildcard Qinwen Zheng or 18th seed Marie Bouzkova.
One player who may be particularly pleased to see this result is world No 2 Sabalenka. She breezed into round three after losing just four games to Renata Zarazua, with the Belarusian next up against 26th seed Nikola Bartunkova.
While Sabalenka is 2,211 points behind Rybakina at the top of the rankings, the 28-year-old is just 952 points adrift in the WTA Tour Race.
If the four-time major winner conquers all in Beijing, she will rise to 7,485 points in the Race, with Rybakina just ahead on 7,502. In the official rankings, a tournament win would put Sabalenka on 8,420 points, with Rybakina on 9,696.
So while Sabalenka can overtake Rybakina in the WTA Tour Race in Wuhan (12-18 October), she would need to win that event and then have a run at upcoming WTA 500 events such as Ningbo or Tokyo to take top spot.
However, Sabalenka hasnât won a title since triumphing in Miami back in March, so there is no guarantee she will go all the way at the China Open. Nonetheless, the Race for the year-end No 1 has just got a little bit more interesting.