Rory McIlroy carded a bogey-free seven-under-par 65 to move within four shots of leader Fredrik Jacobson at the WGC Champions tournament in Shanghai.
The US Open champion is second in the European Tour's Race to Dubai and chasing back-to-back victories after winning last week's Shanghai Masters.
Overnight leader Jacobson extended his advantage with three successive birdies early on as he finished on 16 under.
Louis Oosthuizen is second on 14 under with Adam Scott one shot further back.
Scott's day was overshadowed by comments made by his caddie Steve Williams about his former boss Tiger Woods.
Williams apologised for the comments he made at an awards dinner on Friday night which he accepted could be "construed as racist".
Australian Scott later stood by Williams and insisted there were no grounds to sack his caddie.
"I think everything in that room last night was all in good spirits and bit of fun and I think it probably got taken out of that room in the wrong context," said the 31-year-old Scott.
"Look, anything with Tiger involved is a story, but I value Steve's contribution to my game and while he is caddying I hope he can caddie for me."
England's world number two Lee Westwood picked up five birdies in a 67 to sit alongside former stablemate McIlroy at 12 under.
"I really didn't hit it very well. I struggled with my swing and wasn't very consistent," said Westwood. "But I putted well and I'm going to have a chance to win. That's all you ever ask at any tournament."
Former US Open champion Graeme McDowell and former world number one Martin Kaymer were 11 under after rounds of 67 and 68 respectively.
Sweden's Jacobson ended an eight-year wait for a maiden victory on the US Tour at the Travelers Championship in June, and insists he is happiest leading from the front.
"When you are playing from behind you have to go out and shoot a low number," said the US-based 37-year-old.
"Leading, I have still got to shoot a good score but they will have to catch me which is a lot nicer because sometimes I feel a bit stressed if I start off a few shots behind."
South Africa's Oosthuizen maintained sole possession of second place with a 68, while Scott put the controversy surrounding his caddie to one side to finish strongly and stay in contention.
After a double-bogey seven via two trips to the water at the eighth, the world number eight fired back-to-back birdies on 16 and 17 and then holed his wedge shot into the 18th green for an eagle and a 69.
McIlroy, 22, has an extra incentive to win as the first prize of 842,217 euros would take a big chunk out of the 1.3m euros he trails the absent Luke Donald on the European Tour money list.