Khang, who finished third in this year's Women's PGA Championship but is without a career win on the LPGA Tour, held a one stroke lead over Sweden's Linn Grant after carding a bogey free seven-under par 66.
She birdied the par-three third but burst into life with the first of her five straight birdies on the 11th hole.
It was the perfect response to her opening round of 71, which had ended with the disappointment of three straight bogeys.
"It was a solid day. I felt good yesterday but it's never a good feeling finishing three bogeys in a row but I knew I could play some pretty good golf out here," she said.
"Each day is different but kind of mid-round my ball striking got pretty hot and then my putter was just getting hot as well," she said.
Khang has been one of the most consistent performers on the tour this year - she has only missed two cuts and has claimed five top-15 finishes in her 15 starts, including a tie for third at the Women's PGA Championship.
Grant, starting on the back nine, got her round to three-under before bogeys on the fourth and ninth hole undid some of her good work.
The Swede won the Dana Open last month in Ohio and said she hoped to relive the feeling of being in contention for a title on Sunday.
"I would like to see my name up there. That's what I play for, so obviously just try to get used to that feeling more and more because that's where I want to be," she said.
Japan's Yuka Saso, the overnight leader, was level with South Korean Ko Jin-young, two shots back of Khang.
American Nelly Korda produced another round of 70 to sit a further shot back although she was disappointed to end with two bogeys in her last four holes.
"Other than that, I played well, putted well. Hopefully I can bring some momentum going into this weekend," she said.
Four players were on three-under for the tournament - England's Georgia Hall, who shot 68, Sweden's Hannah Green and South Korea's Kim Sei-young.
Home favorite Brooke Henderson shot a bogey-free 68 after her disappointing 75 on Thursday.
"Yesterday was not good, so coming out early this morning just wanted to get off to a good start, and birdieing the 11th hole, my second hole of the day gave me the right momentum," she said.
"Made a couple par saves after that which were nice. To chip in on first hole, again, that was a huge boost in the right direction. Was able to carry that momentum through the rest of the day," she said,
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