World number 24 Sindhu, who is the lone Indian woman in the fray in the absence of star compatriot Saina Nehwal, won 21-19 9-21 21-16 in a tense 45-minute contest against the second seeded and world number three Chinese.
Sindhu turned out to be more aggressive than her fancied opponent as she went on to hit as many as 26 smash winners as opposed to 20 by the Chinese. The net game was a close affair as the Indian had nine points to the Chinese's eight.
This was Sindhu's biggest win in her career. Sindhu came into the match high on confidence, having got the better of world number 14 and eighth seed Porntip Buranaprasertsuk of Thailand in the pre-quarterfinals of the tournament.
The 17-year-old Indian will now take on the winner of the match between Busanan Ongbumrungpan of Thailand and fourth seeded Yanjiao Jiang of China in the last four stage.
The young Indian straightaway opened a 3-0 lead and then made it 6-1 in the opening game before the Chinese reduced the gap to 6-7. Sidhu continued to maintain the lead but Xuerui used all her experience to make it 18-19.
It looked like Sindhu would wither under intense pressure from the vastly experience opponent but the Indian admirably held on to her nerves to take the first game 21-19.