The sixth seed had little trouble despatching Romania's Sorana Cirstea 6-4 6-1 on a breezy day at Rod Laver Arena to underline her title credentials in Melbourne.
As shown by her breakthrough French Open triumph in 2011, Li has the game, built around a cracking forehand, to topple the heavyweights if only she can win the mental battle in her head.
A bonus for Li is the absence of four-times grand slam champion Kim Clijsters, who beat her in the 2011 final and knocked her out of the fourth round last year.
Li imploded after taking winning positions in both of those matches, but the signs look good at Melbourne Park for the late-blooming 30-year-old, who has now made the second week for a fourth straight year.
A very winnable match against 19th seed Julia Goerges of Germany is up next, with fourth-seeded Pole Agnieszka Radwanska likely to provide the acid test in the quarter-finals.
World number two Maria Sharapova would then be the odds-on semi-final opponent, and a major test, but ranking and reputation hold little fear for Li.
"I always try to play my game on the court ... but sometimes I was fighting against myself," the Chinese told reporters.
"I always waste a lot of energy on the court. Right now the first step I have to follow (is) I don't have to (fight) against myself. So this is big step for me."
Since Roland Garros victory, Li has failed to make a big impression at the majors, and struggled with the hype of being Asia's first grand slam champion.
A switch of coach to Carlos Rodriguez, former world number one Justine Henin's former mentor, could be set to pay dividends at the Australian Open, however.
Rodriguez has already taken the pressure off Li's husband-coach Jiang Shan, a stoic figure in the player's box and occasional target of his wife's tantrums.
Rodriguez has also re-tooled Li's serve and forehand, encouraging her to use more topspin as a foil for her flatter rockets from the baseline.
"Carlos prepares what I should do on the court, because sometimes I was thinking too much," added Li, China's last singles survivor after Zheng Jie was bundled out by Goerges.
Li has made a habit of starting years with new brooms, only to finish them fatigued, demoralised and ready to launch a new round of hiring and firing in her team.
But her confidence was palpable as she teased Chinese media, who left her weeping bitter tears last year after she threw away her match against Clijsters.
"I really want to be top three. This is the goal for the whole team," she said. "I know it's tough but if you didn't have a goal maybe you just feel like, 'Oh, number six also is pretty good. I don't even have to work'."
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