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He is a Kung Fu teacher who teaches his students to be completely merciless, and is the shifu/owner of the Fighting Dragons Kung Fu studio. He is the former master of Cheng and his gang and the arch-enemy of Mr. Han.
Master Li is the owner and teacher of the Fighting Dragons Kung Fu studio, which similar to the Cobra Kai dojo in the original trilogy/Netflix/Youtube Red series of the same name & the Alpha Elite in The Next Karate Kid, teaches their students to break their opponent's bones & be absolutely merciless towards them at all costs. One day, Dre Parker and his apartment's maintenance man Mr. Han, interrupt a lesson due to an earlier incident when some students from his dojo who beaten up Dre & Mr. Han intervenes for Dre; to make a peace offering. Li harshly rebuffs the peace offer and says that Dre should take care of his problems by himself. Mr.Han says that 1-1 is no problem, but 6-1 is too much of anybody. Li says that he gets it and then he orders his students to prepare for a match & wants either Han or Dre fight one of his top students named Cheng. Then he says that Mr. Han attacks his students, disrespects his studio & he wants to leave; it's not gonna be that easy. Li then says that since both Dre and Mr.Han both showed up at his studio, one of them has to fight now. Han then notices a poster for an open Kung Fu tournament and tells Master Li that Dre will be fighting there. He laughs momentarily & says that he & his students accept the challenge, and they also agree with a particular condition from Mr. Han. The condition that Mr. Han makes Li agree with is that Dre will enter the tournament, but; Dre is to be left alone so that he can train under Mr. Han's guidance. In Mandarin Chinese, he strictly instructs all of his students that from that day forward, Dre is to be left alone until the day of the big tournament. He then asks his students if they understand, in which his students reply in Mandarin Chinese that they get it. Dre & Mr. Han prepare to leave, but Li momentarily stops them and then tells them both not be late for the tournament & should Dre be tardy, the bullying from both his students and him will only get worse for both Dre & Mr. Han. The day of the big open Kung Fu tournament, Li tells another one of his other best students named Liang to break Dre's leg and Liang succeeded in doing so but he unfortunately got disqualified in the process. Han then heals his Dre's leg & Master Li congratulates Han for getting Dre back on the tournament piste and watched as Cheng fought against Dre. However, in the end; Cheng winds up getting defeated, presenting the trophy & apologizing to Dre for beating him up. Pretty soon, Cheng and the rest of the Fighting Dragons students end up bowing down to Mr. Han.
It's unknown what happened to Master Li afterwards, but it's quite possible that he was eventually arrested for his terrible influencing on his students and his studio was shut down.
Towards the end of the film, as Li's students bow to Mr. Han and show respect to him, Li is seen astounded but when Dre and Mr. Han leave the tournament, he is inexplicably seen on the floor without explanation.
This error is given that in an alternate ending. Li was very angry with Cheng for losing to Dre and showing respect towards both him and Mr. Han. Master Li is about to slap Cheng, but Mr. Han stops him, fights him and nearly defeats him. Li was seen resting angrily, and later got punched in the jaw by Dre's mother as punishment for ordering his students to injure her son. It got removed apparently because it would have taken too much focus away from Dre's victory.
In the biggest twist of irony, despite being the titular martial art; neither Li nor the other characters of the film are shown using karate to fight, using kung fu instead. Indeed, back when the remake was in development, Sony considered to change the title to reflect this, but the franchise producer Jerry Weintraub rejected the idea, possibly to keep the title in line with that of the previous films.
Li is based off John Kreese from the original trilogy and Cobra Kai & Colonel Dugan from The Next Karate Kid. However, in comparison to Dugan & Kreese, Li is much darker far more enigmatic than both Dugan & Kreese due to his lack of a tragic backstory and the fact that he physically abused his students for showing mercy and respect even before the Fighting Dragons' lost the tournament.
Li never speaks English throghout the whole movie.