You can create an encoder based on the encoding of the xml content :
string encoding = "UTF-8"; // should match encoding in XML
string xml = @"<?xml version='1.0' encoding='UTF-8'?><table><row>1</row></table>";
var ms = new MemoryStream(Encoding.GetEncoding(encoding).GetBytes(xml));
var xdrs = new XmlReaderSettings()
{IgnoreComments = true,
IgnoreWhitespace = true,
CloseInput = true};
var xdr = XmlReader.Create(ms, xdrs);
while (xdr.Read())
{
Console.Write("qqq");
}
For more information about encoding, there is a related question