SHANGHAI, 7 Nov 2014 (AFP) - As on Thursday, the Northern Irishman was flawless over the Sheshan International Golf Club layout, posting five birdies and 13 pars.
Second is fellow Ryder Cup player Ian Poulter and who also shot 67 to total seven-under par 137.
A shot further adrift is double Masters champion Bubba Watson, who also shot 67 after finishing with five straight birdies, and Japan's 33-year-old Hiroshi Iwata who had the round of the day, a seven-under 65, in his maiden WGC event.
McDowell will tee off in the final group with Poulter and Watson Saturday, eerily reminiscent of a year ago when it was the same two Europeans and American Dustin Johnson who battled it out over the final two days.
Johnson emerged victorious after a titanic final round three-ball a year ago. McDowell is hoping history doesn't repeat itself.
"We've got fairly decent replacement for Dustin in Bubba whose got the same kind of talents in the way he drives it and his short game," McDowell said.
"In many ways it's a very similar scenario. Myself and Poults against the long-hitting American."
Poulter has had a lean year by his own standards, dropping to 44th in the world after a series of injury lay-offs.
"That's probably the best I've played all year, which is very exciting," Poulter told reporters after his five-under round. "Chances started to go in at the end, and I'm very happy.
"We've got 36 holes to go. You've got 36 potential birdies. So three shots is pretty close. I played with Graeme in the last round last year, and he likes this golf course."
Watson exploded into life on the back nine, finishing with five birdies in a row and card that contained two rare chip-ins.
"It was a struggle," the American conceded. "Hit some good shots but couldn't make some putts. Hit some bad shots and made some putts.
"I got two chip-ins. One was with a four-wood just off the green and lob wedge on the other one," the 2012 and 2014 Masters champion added.
"Yeah, obviously when you chip it in, it makes the day seem a little bit better."
World number two Adam Scott put himself in contention by getting to six-under for the tournament with four birdies in the first seven holes of his round.
Then dropped a horror six shots in two holes to tumble down the leaderboard.
First up was a quadruple-bogey nine at the monster 603-yard par five eighth, followed by a double-bogey six at the next.
Scott's tee shot at eight was into trees left and after a long search his ball was found but unplayable.
He went all the way back to the tee for his third, which found the fairway. His fourth was into rough short of the green.
Scott then mishit his pitch into a water hazard where he landed on the bank, but could not play because of a rock behind the ball.
Back he went to the drop zone to play his seventh shot and two putts later his ball finally found the cup.
In all it had taken a staggering 44 minutes to play the hole, or longer than a half of international rugby.
More trouble followed at the next where his second shot found water and he couldn't get up and down.
The Australian 2013 Masters champion recovered on the back nine and stands two over for the tournament after adding a level-par 72 to his first round 70.
Leading scores Friday after the second round of the $8.5 million World Golf Championships-HSBC Champions at Sheshan International Golf Club, Shanghai (par 72):
134 - Graeme McDowell (NIR) 67-67
137 - Ian Poulter (ENG) 70-67
138 - Bubba Watson (USA) 71-67, Hiroshi Iwata (JPN) 73-65
139 - Kevin Na (USA) 71-68, Tim Clark (RSA) 69-70, Joans Blixt (SWE) 71-68, Rickie Fowler (USA) 69-70
140 - Thorbjorn Olesen (DEN) 72-68, Louis Oosthuizen (RSA) 70-70
141 - Oliver Wilson (ENG) 71-70, Martin Kaymer (GER) 69-72, JB Holmes (USA) 70-71, Henrik Stenson (SWE) 70-71
142 - Jason Dufner (USA) 72-70, Hunter Mahan (USA) 74-68, Adam Scott (AUS) 70-72, Alexander Levy (FRA) 74-68, Jimmy Walker (USA) 73-69, Dawie Van Der Walt (RSA) 70-72