Despite the loss, Azarenka can secure the No. 1 position with another victory in the round-robin tournament, which features the top eight players.
Williams, who is projected to finish the year at No. 3, won her third match at the event when Azarenka served a double-fault. Azarenka also lost the first set on a double-fault and finished with nine.
The Belarusian squandered a 3-0 lead in the second set as Williams won the next four games.
Li’s first win in two round-robin matches means the Chinese player can still reach the semifinals, depending on other results in her Red Group.
The fifth-ranked Kerber, making her first appearance in the season finale, bowed out after losing all three of her matches. She played more than three hours on Wednesday night in a three-set loss to Azarenka.
The top two players from each group advance to the semifinals.
Williams and Maria Sharapova, who was idle Thursday, have already qualified for the semifinals.
Sharapova, the French Open champion, could still take the No. 1 ranking away from Azarenka.
Williams has dominated the second part of the season, winning Wimbledon, the U.S. Open and Olympic gold in London. She’s won 46 of her last 48 matches, but because of injuries and missed tournaments, cannot attain the top ranking.
By Andrew P. Napolitano
The president's men trash the Constitution to pursue antagonists
Independent voices from the TWT Communities
News and opinion from a Millennial Urbanite with Southern sensibilities,
Benghazi: The anatomy of a scandal
Vietnam Memorial adds four names
Cinco de Mayo on the Mall
NRA kicks off annual convention