The 22-year-old defeated Chinese legend Lin Dan on the way to the last four and has now claimed the scalp of Olympic champion Chen, who was chasing a third world title.
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He will now play favourite Kento Momota of Japan or Malaysia's unseeded Liew Daren in Sunday's final in Nanjing.
The brilliantly agile Shi taught Chen, 29, something of a lesson with a comprehensive 21-11, 21-17 victory.
Shi has a long way to go to emulate his more seasoned compatriots, but defeating Chen for just the second time was more evidence of a changing of the guard in Chinese men's badminton.
He beat the 34-year-old Lin to win the prestigious All England Open in March, but the world title would be the biggest achievement of his highly promising career.
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