Faldo hit a two-under-par round of 70, in the windswept conditions to finish as the only player in the 32-nation field not to record a bogey on the exposed Gulf Harbour course.
Faldo and his young compatriot David Carter finished with a combined score of six under that left them two ahead of Australia and South Africa with the Scots team of Colin Montgomerie and Andrew Coltart next best at three under par.
Ireland, the defending World Cup champions, are back in sixth place at one under.
"It was very difficult out there today and no matter how you did it you needed smart play just to keep par on your card," said Faldo. "David holed a couple of putts there at the end which we needed because he struggled for one and a half rounds.
"But today was all a case of looking for the right spot to hit on the greens. It wasn't easy out there and the way the wind was affecting the putts on the green made it even more challenging."
Carter, a World Cup debutant and last July's Murphy's Irish Open champion, hit four birdies and three bogeys in his one-under-par round of 71 to get his overall score back to a creditable even par total.
Montgomerie produced the equal best score of the day, a three-under- par 69 that helped ease Scotland into fourth place and compensated for his team-mate Coltart stumbling to a two-over-par 74.
The first-round leaders, Japan, only managed a combined 12-over- par second-round score falling to a one-over-par aggregate.
Ian Woosnam suffered an unlucky setback on the eighth hole when his tee shot rolled into a spectator's open handbag. "It's happened to me before and I knew the ruling," said Woosnam, after his round of 74 that left him and Philip Price with a disappointing seven- over-par team total.
In Miyazaki, Japan, Lee Westwood fired a four under-par 67 to take the midway lead in the Dunlop Phoenix tournament, setting himself up for back- to-back victories on the Japan PGA Tour.
After two birdies on the closing holes, Westwood went two shots ahead of Darren Clarke of Northern Ireland, Kaname Yokoo and Ryoken Kawagishi for a two-day total of seven-under 135.
Another Briton out in the lead was David Howell, who shot a six- under-par 66 to open up a two-stroke lead after the second round of the Australian PGA Championship in Sydney. The 23-year-old fired seven birdies to reach the half-way mark of the tournament in nine-under-par 135, two shots ahead of the veteran Australian Terry Price.Reuse content