James, a winner of 18 events on the European PGA Tour, owns a one-shot lead over Zimbabwe's Mark McNulty and Mark Johnson of Helendale, Calif.
The seven-time European Ryder Cup team member and captain of the 1999 squad posted a 70 in the morning and stands at 7-under-par 137 after two days of play.
'I had another steady round again in the wind and am happy with my position at the moment,' James said.
Johnson, who played on the Nationwide Tour in 2001 and the Canadian Tour last year, played with James on Wednesday and also carded a 70.
'Mark and I sort of fed off each other a little bit out there,' Johnson said afterward. 'He's a very good player, but there's lots of good players in this field. Regardless of what happens to me the rest of the way, this has been a good experience. I want to play the Champions Tour, but I don't turn 50 until May 2.'
After a lackluster round of 74 on Tuesday, Pat McDonald, a regular on the Champions Tour this past season, bounced back with a bogey-free, 5-under 67, the lowest score by any player in the field. McDonald's round included four birdies in a five-hole stretch on the back nine and jumped him up 55 spots into a tie for eighth.
'I was really disappointed with yesterday's round after the way I've been hitting the ball lately. I started out four-over after nine holes and just told myself that if I could get it back to two-over by the end of the day, I'd be okay. I managed to do that and today, I just tried to get it back one hole at a time and be patient,' McDonald said.
McDonald appeared in 22 events in 2003 and finished 56th on the money list with just one top-10 finish.
First-round leader, Australian Terry Gale, struggled with a 2-over 74, but still remains in contention, as he is in a tie for fourth place along with Lonnie Nielsen, a three-time National Club Professional Player of the Year from East Aurora, New York, and Champions Tour veterans Joe Inman and Jack Spradlin.
The starting field of 110 professionals was reduced to 76 players, as the cut fell at 5-over-par 149. After Friday's final round, the low-seven finishers receive full exemptions into all open co-sponsored events on the Champions Tour next year. The next eight players and ties all receive conditional status on the Champions Tour for 2004 based on their order of finish.