In the opening stages of the race, Vettel seemed to comfortably control the pace, keeping Bottas about 2.5 seconds behind.
The defending champion dominated practice here on Friday, but he was unable to get his tyres to light up in the cold conditions, and lines up behind team-mate Valtteri Bottas for the second week on the bounce.
The Englishman has won five times in China - including past year - and will be looking for his first victory of the season on Sunday. It was a day to forget for Lewis Hamilton who was consistently off the pace of teammate Valtteri Bottas and in the end had to settle for P4, behind his teammate.
Ferrari have not been victorious in Shanghai since Fernando Alonso took the flag in 2013, although Vettel was second previous year, in a race dominated by Hamilton and Mercedes, who have won every meeting here since the turbo hybrid era began in 2014.
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The Dutchman was pushing through the field and fighting Vettel for third place when he made a late move at the hairpin on lap 43 - clashing with his Ferrari rival and pitching both into a spin.
"We've shown in the past that we have recovered from hard periods, and I have actually started to appreciate the hard days because they make us progress and understand our vehicle better", he explained.
The following two tabs change content below. Now the wind had stopped, but we had a bit of tailwind the whole race, and you have 41 laps to know that it's tricky to stop the vehicle there anyway. The two finished +0.580s and +0.701s following the time set by Vettel.
"I was in no man's land today", said Hamilton.
That meant Verstappen, who had the advantage of fresher tyres, dropped from fourth to fifth in a race he could have won and that went instead to Australian team mate Daniel Ricciardo.
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But Hamilton insists that there's a long way to go and he has a lot of work to do in order to challenge for the title.
"I was happy with the whole lap, not just the last sector", he said. "Obviously after a collision like that I think we might have stopped there".
And, with just 0.108 secs splitting the Top 4 drivers (Ferraris and MercedesAMGs), it looks set to be a close contest in Shanghai qualifying strongly Saturday could play a big part.
"I didn't see him until very late, I left a little bit of room as well", he said. I had the older tire on and was running out of it.
"We knew that it is possible with this kind of gap, if you get everything flawless, coming in, in the box, into the pit lane and all that", said Bottas.
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