His stint in charge got off to an inauspicious start before a 4,000-strong crowd as the loss meant the team will miss the final of the four-nation China Cup.
Chanathip Songkrasin, known as the "Thai Messi", slotted a pass into the net 33 minutes into the game at the Guangxi Sports Centre in the southern city of Nanning.
The Warrior Elephants even came close to widening their lead in the second half but were denied by great saves by goalkeeper Yan Gunling while China's forwards missed several chances to equalise.
Cannavaro's appointment as China coach last week was met with criticism and even anger.
The Chinese Football Association has not made it clear if it was a permanent or temporary role for the Italian, who will remain in charge of Chinese Super League giants Guangzhou Evergrande.
The 45-year-old's ascension to the post -- with mentor and predecessor Marcello Lippi remaining as an adviser -- was widely predicted in Chinese media.
But sceptics said the former Juventus and Real Madrid centre-back has done little to prove he deserves the job.
In Cannavaro's first full season with Evergrande last year, the southern team relinquished their seven-year grip on the Chinese league trophy.
He previously had a seven-month spell with Evergrande before being sacked in 2014, and won promotion with Tianjin Quanjian in 2016, steering them to third in the CSL table the following year.
China and Cannavaro -- if he lasts beyond the next match -- are building towards the qualifiers for the Qatar 2022 World Cup, which begin in September.
China have reached the World Cup only once, in 2002, when they failed to win a point or even score a goal.
The four-team China Cup in Nanning sees Uzbekistan play Uruguay Friday night. The winners play Thailand in the finals next Monday while China will settle for a third-place game.