James scored twice and set up three of England's other goals in a brilliant performance in just her second World Cup start.
England have been keen to keep a lid on the hype around James given she is just 22-years-old, but after her remarkable performance against China, she is already established as one of the stars of this year's World Cup.
Daly, 31, has seen James' development first-hand with England and said she cannot speak highly enough of her.
"She has got great technical ability, but those [goals] come out in training all the time," Daly said. "It's nothing new for us. Like I said the other day, it's just nice for the rest of the world to see how good she is. Cheat code as everyone is calling her. That's what she is.
"I mean you put LJ anywhere on the pitch and she'll get the ball, because players want to play with her. I personally love linking up with her, she's a great player. I can't speak highly enough of her. But she caused a real problem throughout the whole game to be honest. She is a nightmare for defenders to defend as the ball just sticks to her. She's lethal."
James could have had a hat trick but had a goal ruled out after VAR deemed Lucy Bronze to be offside in the build up to another long-range effort.
James' first was remarkable as she took a pass off an Alex Greenwood free kick and finished with a curled effort from outside the box. And her second was equally special as she planted a side-footed volley past the China goalkeeper off Jess Carter's cross.
James ended up taking the Player of the Match trophy for the second match running, after she scored England's winner against Denmark in their 1-0 win last Friday. It was an honour Daly predicted would be heading James' way.
"I will just say one thing, [on Monday] we were walking round the pitch, and there's the Player of the Match sign as you walk out.
"I said [to James]: 'Have a look at that kid, because that will be you tomorrow night.' That's how much we back her! She is unbelievable.
"I have got no more words to say about her. She is growing and growing, and the most important thing is we keep around her. She is a young player at the end of the day and she's learning every day. She can pick up little bits from the older players, but she is LJ -- and she's brilliant."
Daly was delighted with England's comfortable win as they answered the critics after back-to-back 1-0 victories. Daly scored England's sixth with a brilliantly taken volley, while Alessia Russo, Lauren Hemp and Chloe Kelly also scored alongside James' double.
"I think obviously there has been a lot of criticism about us not being ruthless enough and that echoes my words the other night," Daly added. "I said we would grow into the games and it's tournament football. It's not about the first, second, third win, it's how we grow into it.
"We knew it would come and that it would only be a matter of time before we scored goals -- and there were some unbelievable goals on display tonight. It was a great, complete performance from the team. Obviously, we are disappointed to concede but that's football, and we will take the six other goals we scored."
England face Nigeria in the round of 16 on Aug. 7 in Brisbane and Daly is wary of the threat they pose.
"They have been brilliant this tournament," Daly said. "I think what you have seen is that they are a very athletic side. They are a brilliant side and have done really, really well. We will focus on them over the next few days."