Allen, coming off the back of his victory in the World Open in Haikou earlier this month, went down to a 5-2 defeat at the hands of Englishman Walden, who will now face Stephen Maguire in the next round.
"That didn't go as planned," Allen wrote on his twitter account. "Poor performance and some costly errors at wrong time.
"All credit to Ricky. He played solid. Good luck to him."
The defeat marks the second year in succession Allen has crashed out at the opening hurdle in Beijing after his first-round loss to Marcus Campbell 12 months ago.
World champion John Higgins is safely through to the last 16 after seeing off Rory McLeod 5-1 and will now face Peter Ebdon or Matthew Stevens in the next round.
Also advancing is Welshman Mark Williams, who defeated Jin Long 5-1 and now faces the prospect of meeting Ronnie O'Sullivan in the next round, providing the three-time world champion can overcome Scotsman Campbell in their first-round meeting later on Wednesday.
Stuart Bingham also progressed after defeating fellow Englishman Joe Perry 5-4.