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Edinburgh's Gregor Laidlaw crossed under the posts but China responded instantly through Wang Jiacheng. Glasgow Warriors' Colin Shaw touched down in the corner as Scotland restored their lead, but China then scored twice in succession. Jin Ye utilised his pace to go round the outside of the Scotland defence for a converted try to level the scores at 12-12 before Zhang Zhiqiang burst through a gap with one minute remaining.
Richie Vernon made a fantastic individual break but could not offload the ball out of the tackle as China held on to dent Scotland's hopes of reaching a 10th straight IRB World Sevens Series cup quarter-final. Scotland coach Stephen Gemmell told PA Sport: ''We should be good enough to beat a team like China and that's not being disrespectful to them.
''But to be able to beat any team you have to perform, and we didn't perform. There are massive highs and lows in this game and this is a massive low for me as a coach.
''We need to regroup quickly - this type of tournament is very unforgiving - if you feel sorry for yourself then you'll be punished.''
Against the Kenyans Scotland struggled to combat the direct running and clean ball retention of the Africans in the Pool E encounter.
Humphrey Kayanage cut a straight line to dissect the Scotland defence and score under the posts to break the deadlock as Kenya established a 7-0 lead at the break. Kenya made the most of an overlap for Innocent Simiyu to score 30 seconds into the second half before Kayanage slipped down the blindside for his second of the game.
Scotland spread the ball the width of the field and back again for Edinburgh's Alistair Warnock to pull a try back halfway through the second period but it proved too little, too late as Scotland failed to reach the last eight of the cup for the first time since February 2007.
''It's not the way we wanted it to end - we wanted it to end because we got to a semi-final," said Gemmell. ''But the challenge now is how to respond to that. We made life really difficult for ourselves this morning with that result against China because what that effectively meant was we were depending on the result in the last game.
''The boys are feeling sorry for themselves but they've got to pick themselves up and come back tomorrow and do it all again.''
Meanwhile Wales were forced to sweat over a cup quarter-final place following a 15-0 loss to Pool D winners Fiji.
Ratunasia Narukutabua scored the only try of a tight opening period to hand Fiji a 5-0 half-time lead.
Lepani Nabuliwaqa extended Fiji's advantage three minutes into the second half and Wales struggled to find a gap in the Pacific islanders' all-encompassing defence.
William Ryder scored a fantastic individual try to cap the win.
Wales captain Jonathan Edwards told PA Sport: ''We were unfortunate.
''When you're playing against these teams you've got to take your one or two opportunities, which we failed to do.''
Earlier Llanelli's Lee Williams scored 14 points as Wales romped to a second straight victory in Pool D with a 34-5 defeat of Korea. Ospreys' Gareth Owen and Aled Brew, captain Jonathan Edwards, of the Scarlets, and Williams each touched down in the first half as Wales opened up a 24-0 half-time lead.
Cardiff's Richard Pugh scored early in the second period before Lee Jung-Min claimed a try for Korea.
But Williams added his second try of the game to complete the rout.
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