The world champion silver medallist and 2008 bronze medal holder overcame a penalty turn to win the three lap race comfortably.
"I give it my best for Weymouth, the whole world and also for my country China", Xu told the BBC.
Marit Bouwmeester of the Netherlands won silver and Belgium's Evi Van Acker bronze in a fast race on the Nothe course in front of thousands of spectators.
Ireland's Annalise Murphy lost the battle for a medal, finishing fourth. Only one point separated the first four ahead of the medal race.