The team broke a 13-year-old jinx when skipper Rani scored the final goal and Savita foiled an attempt from the rivals to ensure a 5-4 win.
India had failed to qualify for the last World Cup and finished ninth in the 2010 edition.
Rani scored twice while Monica, Lilima Minz and Navjot scored a goal each in the shootout.
Earlier, it was Navjot Kaur who scored India's lone goal in the 25th minute while China found a late equaliser through Tiantian Luo, who converted a penalty corner in the 47th minute.
More From This Section
It was advantage China right at the start as a stick check in the circle saw India concede a penalty corner in the second minute of the game.
However, Savita was at her best and padded it away while an alert Deep Grace cleared the ball. Soon after, Indian forwards launched a swift attack with Navneet Kaur and Vandana working in tandem to find space in the Chinese D but an attentive Wang Na averted danger.
China, meanwhile, won their second PC but Savita was spot on yet again to pad away Meiyu Liang's flick.
Navjot came close to converting a field goal in the 17th minute but her diving effort was blocked, even as skipper Rani made a quick attempt to find a deflection.
It was not until the 25th minute when India found their first breakthrough as Navneet and Rani played give-and-take before penetrating the circle, only to assist Navjot, who took a clear shot on goal.
Though China launched a counterattack soon after, Indian defenders were up to the task.
Neha Goyal and Lilima Minz showcased good dribbling skills to steer past Chinese defenders but a second goal remained elusive even as the clock ticked away.
On China's part, they stayed disciplined in their defence to deny India a chance to score through a PC.
The final quarter was tense as China won a PC through successful video referral in the 47th minute. Tiantian Luo kept low as she improvised from the injection to find the right corner of the post, scoring a sensational equaliser.
Meanwhile, China won their fourth PC of the match with little less than three minutes to go for the final whistle. But it was brilliantly saved by rusher Sunita Lakra and almost immediately, India launched a counterattack but only to send the ball wide off the target and complete the full time in a stalemate.
The men's team had also emerged Asia Cup champions early this year.