Lao is one of the best picks against Kang. Still, Kang has an edge....
LAO
Throwing hats from across the screen is a good play. It does more damage than Liu's fireballs, and it protects you from flying/bicycle kicks. Anytime Kang throws a high fireball, if timed right, you can get a jump kick/dive kick combo in. Time your teleports intelligently, namely when you see Kang going into animation for a fireball. Use jump punches to get in close. Kang's jump punch beats just about everyone in the air, except Lao. A surprising big weapon for Lao in this match is his low toe. Kang and Lao have the best low toes in the game. Kang usually likes to turtle and low toe when opponents creep in on him. With Lao, you can out-toe Liu many times. The whirlwind spin DOES have a use in this match! When you're within sweep distance, if you do a jump around kick as Kang low fireballs, you can spin him while he's still stuck in fireball pose. This might sound like a rare oppurtunity, but Kang often does low fireball within sweep because Lao's sweep isn't long enough to trip Liu. His knee (kick, up close) is his best jab option in this match.
KANG
Instant fireballs are definitely helpful in this match. With a steady barrage of low, high, and air fireballs, you can usually keep Lao pinned back. When you do this, Lao often teleports. When he does, just duck and bicycle kick him as he comes up. They are pretty even on CQC but I'd say Kang's thrust (HP close) will connect more than Lao's headbutt. Try punishing Lao's whiffed sweep kicks with a fast bicycle kick. A good play up close is high fireball, then low fireball immediately afterwards (Lao often tries to move forward or sweep after blocking the high fireball). Instant flying kicks are always great from crouch. Avoid jumping too much as Lao tends to own the air.
6-4 for Kang. The best Lao players are incredibly hard to pin down, and will go nearly even with Liu. The fact that Lao can win a spam war with Kang means that Liu will have to do something special vs an elite Lao.