American Andy Roddick, serving 20 aces, beat an error-prone Ivan Ljubicic 6-4, 6-7, 6-1 to win the day's other clash after failing to capitalise on two match points in the second-set tiebreak.
Nalbandian, the world No 7, bludgeoned world No 1 Federer in the first set with deep, powerful groundstrokes that skidded on the indoor surface of the futuristic Qi Zhong stadium.
The Argentine won the first of his three service breaks during the set with two consecutive groundstroke winners to the corners.
But Federer changed the rhythm of the game from the second set, bringing Nalbandian close to the net and passing him.
The rattled Argentine started to make errors and after breaking serve in the first game of the second set, Federer dominated.
Nalbandian lost a chance to break back in the second set by missing an easy return.
"I had to make him hit some errors -- he wasn't doing that at the beginning," Federer said.
"A couple of years ago I wouldn't have known what to do," the world No 1 said, adding that experience had taught him how to handle "an incredibly good baseliner" like Nalbandian.
The Swiss player won seven of his eight points at the net but Nalbandian, frequently at full stretch, won just eight of 16.
Nalbandian blamed a weak first serve for his loss but said of Federer: "He has all the shots. I mean, he can make any shot from anywhere."
Nalbandian clawed his way back from two sets down to beat an injury-hit Federer in last year's final of the Shanghai Masters but Federer has now won eight of their last nine meetings.
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