The kinetic theory of granular flow (KTGF) is modified to fit the Einstein's equation for effective viscosity of dilute flow. A pseudo-fluid approach based on this modified KTGF is used to simulate the dynamic formation and dissipation of clusters in a circulating fluidized bed riser. The agglomeration of particles reduces slip velocity within particle clusters, and hence results in two reverse trends: discrete particles are lifted by air while particle clusters fall down along the wall. The dynamic equilibrium of these two types of motion leads to the characteristic sigmoid profile of solid concentration along the longitudinal direction. The predicted solid velocity, lateral and longitudinal profiles of solid volume fraction and annulus thickness are in reasonable agreement with experimental results.