That left the American tied for 17th, four strokes behind 34-year-old Huang, who is ranked 1,189th in the world, but quickly making up ground.
A former labourer who never picked up a golf club until he was 22, Huang won last month's Mainland China Qualifying Tournament by a whopping seven strokes and has continued his good form.
His round of 66 on Thursday featured eight birdies and left him with a one stroke lead over American Peter Uihlein, Chile's Felipe Aguilar, Thailand's Kiradech Aphibarnrat and South Korea's An Byeong-hun.
"Last year I played very bad," said Huang. "This year I have changed my swing and yesterday I changed the driver and I like the new driver.
"I like the course. The green speed is very good."
Watson, who won last year's WGC-HSBC Championship in Shanghai in a playoff, initially struggled with his putter in his return to China but got things going late.
"It was a slow start, getting used to the greens," he said.
"The speed, coming from the Masters to here, is a little different.
"I three putted one hole, some of my chips didn't turn out the way I wanted to, but I made three in a row there to get to two-under so that's nice."
(Writing by Julian Linden in Singapore; editing by Sudipto Ganguly)
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