Williams, who has now levelled Steffi Graf's record of 59 winning matches at the event, battled back from 5-2 down in the second set to clinch a straight-sets win.
Breaking Li three times in each set, Williams surrendered her own serve on three occasions to win after one hour and 50 minutes. The powerful American fired down three aces and coughed up six double faults.
Williams will face either defending champion and fourth seed Agnieszka Radwanska of Poland or 30th-seeded Belgian Kirsten Flipkens for a place in the final.
Williams now boasts a 7-1 head-to-head record against Chinese star Li, whose only win came at Stuttgart in 2008.
"I'm excited," said the five-time champion in her on-court interview. "It's just great.
"Every day I play here is a surprise for me because I enjoy it so much. I enjoy the great crowd and I'm just happy to still be here."