Yu said he was driving down Scenic Drive at the time, in the early hours of May 19, last year.
"When he pulled the knife out of Kiko, he pointed it at me immediately. I didn't know whether he would stab me as well, he might kill me as well."
The Crown says Yu and Li had planned to kill Kiko for money.
Yu told the court today that he had not wanted the murder to go ahead.
He broke into English to address the jury and said he had made "several silly, silly mistakes."
He said he should never have text messaged his friend Li about a robbery and kidnapping and should never have mentioned his friend Kiko as a possible target. "it was a stupid, stupid thing to say."
Yu said he was sorry he had not gone to police and told them what had happened to Kiko but he had been worried that no one would have believed him.
"I was scared. I was being selfish. I didn't want to go to jail for something I didn't do, something I didn't want to do."
He said had he known Li had a knife that night, he would never have let him into the car with Kiko.
"I thought I knew him. I thought I knew he wouldn't do that but I didn't know. I'm sorry."
The court has heard of text messages from Yu to Li in the days leading up to the killing. One of them said: "Kiko has probably quite a lot of money in the card. Family is also very rich. May consider it. Furthermore. I know her pin."
But Yu told the court he never had any intention of hurting Kiko and tried to talk Li out of the planned robbery and murder.
"He decided the target straight away and wanted to kill her," Yu said.
He said later text messages showed he did not want to go through with the murder.
Yu said he tried to make excuses to hold Li back from robbing and killing Kiko and sent a text to Li five days before the killing to say "I've obtained two thousand. Put our plan on hold first."
He told the court that he had been paid the $2000 after referring foreign students to an agent
"Since we had the money, we should not do these things. It was not right to do these things," Yu told the court.
He said it was hard for him to say no to a friend.
"He was determined on her... I had tried to stop him from it but I was unable to. I failed to do it."
Yu's lawyer Mark Edgar earlier described today as "judgement day" for his client.
He described the Crown's evidence as "compelling" but said Yu had second thoughts about the planned murder and robbery of Kiko.
"He was compromised and somewhat bewildered about what happened in the car that night."
He acknowledged Yu had lied to police about what had happened that night.
"He's going to have to front up to that in this trial."
Yu apologised to the court today for lying to the police.
Yu will be cross-examined by the Crown this afternoon.
