World number one Saina squandered a one-game advantage as she lost 21-13 17-21 20-22 to world number three Li in a gruelling semifinal that lasted one hour and eight minutes at Putra Stadium.
Saina, who won the India Open Super Series last week, once again failed to come good against Xuerui, who has now beaten the Indian nine times in 11 meetings.
Saina became the world no. 1 for her exploits at the India Open triumph last week and a semifinal finish here will give her 7700 points but Li reaching the finals means the Chinese will regain her no 1 ranking.
Saina, who had beaten Li only on two occasions at the 2010 Singapore Open and 2012 Indonesia Open, started the match on a confident note as she broke off at 6-6 to gradually increase the lead with straight bursts of points.
The second game was a close contest as lead changed hands too often right from the start after Saina had a narrow 3-1 advantage. After changing to the fast side of the court, Saina found the going tough as Li clawed back quickly and was neck and neck till 10-10, before managing to grab three points at 18-17 to bounce back.
