Pace birdied the first extra hole, the par-four 18th, to claim victory at Yalong Bay Golf Club after the pair had finished tied on 13 under par.
Zhang had stormed through the field with a brilliant 65 that featured nine birdies and two bogeys, while Pace looked like winning in regulation following birdies on the 15th and 16th, only to three-putt the 17th for a bogey in a round of 70.
South Korea's Ye Na Chung finished a shot outside the play-off after a final round of 72, with Sweden's Linda Wessberg and Chinese amateur Yu Ting Shi another shot back on 11 under.
"It's amazing, I love it here," said Pace, who previously won the event in 2010. "It's a really nice feeling to come back and win here again.
"I started off a bit shaky today. I hit a few loose shots in the beginning and then I birdied immediately afterwards which was good. After I made two birdies in a row (on the seventh and eighth) I just started playing really well.
"On the 17th I had a really sandy lie and I thought it was just a normal shot, nine-iron down the left side, and it seemed to get away from me down the right so left me a tricky putt and I three-putted that. I guess I needed that two-putt to seal the deal but in the end I did it anyway.
"I started to get really pumped up towards the end and all the feelings came back from 2010 when I won here. I made a birdie on 16 in 2010 so I was really pumped up to go. Unfortunately I three-putted 17 but it was good enough to win."
England's Trish Johnson finished eight on seven under after a closing 72.