Smriti, a former LPGA player, is lying tied 17th but is six shots behind the leader, Nikki Campbell of Australia.
Campbell shot nine-under 63 with nine birdies and no bogeys.
Smriti shot four birdies on the front nine and added one more on the 13th and was at five-under when she came to the 16th tee. An unexpected double bogey on the par-5 16th halted her progress, but she is very much in line for a good shot at top honours.
The 33-year-old from Canberra, came to Sanya on sponsor's invitation and made good with her best ever 9-under score.
She leads by one stroke over South Korea's Chung Ye-na who shot 8-under 64 that included a double "hattrick" of birdies ( holes 6, 7 8 and 13, 14, 15). The other two birdies were posted on holes 2 and 18.
Six players Shi Yuting (China); Anne-Lise Claudal (France); Charley Hull (England); Lee-Anne Pace (South Africa); Lin Xiyu (China) and Linda Wessberg of Sweden are tied third on 5-under 67.
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