"We're way too far behind," Mercedes team chairman Niki Lauda said after qualifying.
Both Mercedes drivers, as well as pole sitter and world championship leader Sebastian Vettel, admitted that Ferrari's dominance was a surprise.
"That Ferrari was strong in the heat in Bahrain did not surprise me," said Lewis Hamilton. "But in cold weather, we expected to be faster. I don't understand it."
Lauda, and his Mercedes co-chief Toto Wolff, think the problem is tyre related.
"Our problem is that our tyre window is far too small," said Lauda. "Ferrari has a much bigger window than us."
Wolff, though, urged against panic.
"A car doesn't lose its speed from one day to the next," he said. "There is nothing fundamentally wrong. We have a great car."
He thinks that hotter weather on Sunday will help the Mercedes car.
"If we still have a problem then we have a lot of understanding to do," admitted Wolff. "But normally we get ourselves out of trouble."
Some paddock pundits, however, think Saturday in China was extremely noteworthy.
"This is the turning point," 1996 world champion Damon Hill is quoted by The Sun. "For so long we have seen Mercedes dominate.
"If this is the start of a new era, then Lewis will have to think carefully about whether he signs up to Mercedes for a long term contract."