The world number 12 claimed the seventh ranking event of his career with a topsy-turvy win over his compatriot.
Ding took the first two frames, the second of which was secured with a break of 83, before Xiao responded to take the next two.
Frames were exchanged for 3-3 before a magnificent break of 126 set up Ding for a run of three consecutive frames.
Xiao was unable to make big breaks with any regularity and despite a brief late rally, Ding wrapped things up with a 71 in the final frame.
Before the final I knew I needed to build an early lead, and I had to keep my safety strong to force my opponent to give me chances," said Ding.
"I built a three-frame-lead in the afternoon session because Xiao's safety was not as good as mine. But he managed to play relaxed and open frames in the evening so he did pull some frames back, after I had reached nine. I'm just happy that I managed to win my tenth frame with a solid break.
"Liang Wenbo has been in the final of this tournament too so hopefully there will be many more chances for the players from China. The young generation is growing up quickly so their days will come soon.
"I had to let my emotions go after winning the tournament. This showed how much I wanted this title, I wanted it more than anybody. But there was less pressure on me than in the past when I played here in China.
"I've been changing my game a little bit with a friend's help, and training a lot. Now I can concentrate more on my snooker and this win means a lot to my career."