Irishman Paul McGinley (69) and Spaniard Miguel Angel Jimenez (66) share second place at 7-under-par 137. Jean-Francois Lucquin, Adam Groom, Gregory Hanrahan and Alex Cejka are one stroke further back at minus-6.
Dyson began his round on the front side at the Tomson Shanghai Pudong Golf Club by running off seven straight pars. He stumbled to a bogey at the par-3 eighth, but got back to even-par for his round with a birdie at the par-4 10th.
The Englishman parred the 11th and 12th holes. He began his climb up the leaderboard as he dropped in back-to-back birdies from the 13th to climb past Jimenez and into first place.
Dyson was not done there either, He birdied the par-3 17th to extend his overnight lead to two strokes.
Dyson, who has never held a 36-hole lead in his career, is in search of his first European Tour title. He did win three times as a member of the Asian Tour in 2000.
'I played well all day,' said Dyson. 'The front nine didn't really happen, but I knocked it to about a foot on the tenth so that got me going. It feels good. There's some good names behind me so I'll have to play well at the weekend if I'm going to be here on Sunday.'
Dyson will need to be solid with his play over the weekend as both McGinley and Jimenez are former European Ryder Cup participants.
Jimenez began on the 10th tee early Friday. After parring his first three holes, he ran off four birdies over his next five holes to move to minus-5. Around the turn, he dropped in back-to-back birdies from the first to grab the clubhouse lead at minus-7 and tie Dyson's course record of 66.
Dyson would pass Jimenez later in the day, while McGinley joined the Spaniard at minus-7 with strong play early in his round.
The Irishman picked up consecutive birdies from the second to move to 6 under. McGinley ran off three straight pars before a birdie at the seventh tied him with Jimenez. He then parred his final 11 holes to stay at minus-7.
The Shark, Greg Norman, managed an even-par round of 72 Friday. He stands at 5-under-par 139 in a tie for eighth place with Australian Marcus Both and hometown favorite Lian-Wei Zhang.
Euan Little, Prayad Marksaeng, Craig Spence, Chris Gane, Mattias Eliasson, K.J. Choi and Thaworn Wiratchant are one stroke further back at minus-4.
Padraig Harrington, who won this event last year when it was played in Taiwan, posted his second straight round of even-par 72. He survived the cut by two strokes, as the cut line fell at 2-over-par 146. A total of 81 players advanced to the weekend.