The 22-year-old home favourite compiled four centuries in Nanjing, including a break of 137, in a superb performance that sees him break into the world's top 16 for the first time.
Four-time world champion Higgins, 50, made a break of 101 in the third frame, but the Scot couldn't maintain that form. He was hoping to become the first player to win ranking titles in five different decades, from his teens to his 50s.
Wu sealed the victory with another century break of 108 and became the 80th player to win a professional ranking event title.
“To be honest, it feels unbelievable,” said Wu.
“Deep down I always believed I had the ability to win a title. I thought about it every day. I had a strong desire to lift the trophy. That belief carried me through this week.”
Higgins said: “I didn’t play well at all today. He was hitting the ball beautifully. He was a far better player than me. He reminded me so much of playing Paul Hunter – the way he hits the ball and puts so much action on it. He’s a fantastic player.
“There’s no point in being too disappointed. It opens doors – it shows that snooker is in good hands. I’m glad that maybe in a few years I’ll be retiring with players like that who can pot balls off a lampshade. He’s a total star.”