In only her second appearance in a professional tournament, Yang tacked a round of 6-under-par 66 on to her opening 69 to sit at 9-under-par, one shot clear of Scotlands Mhairi McKay.
LPGA Tour player Catherine Cartwright of Florida and Anne-Marie Knight of Australia share third position at 7-under par, while New Zealander Lynnette Brooky and amateur Tiffany Joh from the USA are tied for fifth position at 6-under-par.
Yang, who has been living in Queensland, Australia, for a year and two months and is currently seeking Australian citizenship, was delighted with her round today, although it wasnt the best of her short career.
Speaking via an interpreter, she said: My lowest score was ten under par 62 in my first round of the Champion of Champions tournament at Caloundra. But coming in to this interview room, I feel very proud of myself.
Yang, who has been playing golf for six-and-a-half years, lives locally to the tournament and her role model, like millions across the globe, is the world number one Annika Sorenstam.
After a faultless round containing six birdies, with five on the front nine, the youngster could be thinking about joining her Swedish idol in the professional ranks some time soon, but said that she plans to wait until she is at least 18-years of age before making that move.
McKay, the joint round first round leader, had a 69 today after a 67 yesterday and lies in second position. I made a good start today and I made a lot of birdies so Im really happy with the way I played. Its nice to have another round in the 60s, said the 2003 Australian Open champion.
I had a similar number of chances to yesterday and Im delighted to be making some good progress. I made a long bomb from about 90 feet at the first and I just had a few mistakes at the 13th, 15th and 18th holes.
Diana Luna, the joint first round leader with McKay, had a 73 and slipped back into tied 13th position after she was penalised by a shot for slow play at the par-5 third hole. She was playing alongside Korean amateur Sarah Oh, who was also penalised for the same reason, and New Zealander Lynnette Brooky.
Brooky, one of the strongest characters on Tour, had a remarkable round of 5-under par 67 in the second round today, after recovering from three days in hospital with a debilitating stomach condition over the weekend.
On her arrival in Australia, she checked in to hospital with what doctors treated as one of worst cases of food poisoning you can get, according to her caddy and manager Gail Allport.
The Kiwi, who first felt the first symptoms after flying in to Australia from the Womens World Cup at Sun City in South Africa, experienced stomach cramps, violent vomiting and diarrhoea.
At the weekend she was forced to pull out of the ALPG Players Championship tournament at Pelican Waters but released herself on Tuesday, adamant that she would compete in this weeks ANZ Ladies Masters, because her mother and father, Margaret and Frank, were in Australia to watch her compete for the first time ever.
A few years ago they were going to come over but mum was diagnosed with cancer so she couldnt come out, said Brooky. Dad was in hospital for a few months with his heart so they thought they better get out and try and do something before they cant.
Brooky had such a bad time with her illness that she said: It was about the only time Ive really wanted to commit suicide. Stomach bugs it was worse than being pregnant, well I guess I wouldnt know but awful.
She revealed that she is still taking two different types of antibiotics, but that somehow her lowered expectations may have helped her out on the golf course.
One of the girls turned around to me and said, Be wary of the sick, and I thought yeah, okay.
Japanese superstar Ai Miyazato shot a 75 and is tied for 57th position after she received a two shot penalty for a putting incident on the second green.
She said: There was a fly buzzing around my head and I brushed it away. When I looked down I saw the ball move. I did not think I hit it and my playing partners did not see it. I called for a ruling and was told there was no penalty. While I was in the scores hut an official told me not to sign my card and to come out and see some TV footage. I saw straight away that I had hit it. I said, Wow, then What is the penalty? They said two strokes. I am sorry that it happened and accept the ruling. It has never happened to me before.
Tournament chairman Bob Tuohy added: In a long experience in golf I have not seen such outstanding sportsmanship. She was stunned when she saw the footage and accepted the penalty immediately and gracefully. Then she walked back to the hut and signed autographs along the way.
After 36-holes, 80 players made the half-way cut, which fell at three over par. The field for the weekend includes 76 professionals and four amateurs.