I usually use XML::XSH2 for XML manipulation. For a task like yours, I'd use something like

for //li/*  mv text() replace . ;
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Update: Ouch, this works better:

for //li/*  {
    xmove (text()|*) after . ;
    rm . ;
}
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or, even shorter:

for //li/* xmove (text()|*) replace . ;
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