The 20-year-old from Guernsey beat Japan's Misaki Doi in two tight sets - and Chang then stunned top seed Sam Stosur in a third-set tie-break.
Watson took her first set against Doi, winning 7/2 in a tie-break after each player broke serve once.
But like Watson's quarter-final win over Pauline Parmentier yesterday, today's second set was littered with service breaks - an area Watson will surely have to improve on in the final.
Watson finally came through with a late fourth break against three for her opponent, wrapping up a 7-6 (7/2) 7-5 win in just over two hours to end the hopes of the home fans.
Stosur was the only woman among the final four who had previously reached a tour semi-final but quickly found herself a set down against world number 134 Chang.
The world number nine from Australia levelled the match but Chang, who knocked out Watson's fellow Briton Laura Robson, was not to be denied. After a break apiece in the final set she forced four match-points in the breaker, taking the second to win 6-2 4-6 7-6 (7/3).