Shenhua, who beat big spending city rivals Shanghai SIPG in the final in November, were handed a 3-2 defeat by Nantong after holding a two-goal lead at halftime.
"For the last two games, the team has had problems both in attack and defence and those will be reviewed by the team," the club said in a statement.
"We're sorry to the many fans who came to support us, and apologise to those who care about Shenhua."
Nantong play in the southern group of China League Two, the third tier of the country's football system which is played on a regional basis.
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Shenhua fielded a side featuring none of the club's foreign players, who include Colombia internationals Giovanni Moreno and Fredy Guarin, and took a two-goal lead into the break through goals from Gao Di and Wang Yun.
An own goal from Aidi Fulangxisi gave Nantong hope and further strikes from Hu Ming and Ji Jun secured the shock win for the home side.
The loss was the second in a row for Shenhua following their 5-1 league defeat to Jiangsu Suning on Sunday and comes on the heels of the club's group phase exit from the Asian Champions League without recording a win.
(Reporting by Michael Church, Editing by Peter Rutherford)
