I'm an American expat in China and I've lived here for several years. I completely agree with the Chinese guy's statement and have thought the same thing myself many times, though I've never heard anyone else openly express it.

Living in an extremely alien culture allows you to see things about your own culture that are hard to notice when you're immersed.

I can be a little more specific about how the propaganda systems work.

The Chinese system:

According to the news, there are more blue skies in Beijing this year than last year, and more blue skies last year than the year before. The pollution situation is getting better and better very rapidly. It's definitely false, but they print it anyway.

Youku and Tudou (Chinese Youtubes) will often have videos of advanced Chinese missiles or other weaponry as the featured video on the front page.

When the Chinese media runs a story on the US, there is a high probability it is discussing some negative aspect of the US (high murder rate, copious drug usage, poor governmental handling of environmental disasters).

And of course you have the censorship end of it: Sina Weibo (Chinese Twitter) and Kaixin (Chinese Facebook) posts are ajax-filtered for sensitive keywords and give you a big red warning if you try to say "bad" things. Or sometimes you'll come back to your computer and some posts you made a couple hours ago are just deleted. Clearly someone monitoring the networks noticed and removed your undesirable content.

I think we can agree the system is used a bit like a blunt instrument. But it works. People, especially the mass population with relatively poor education, really do believe the stuff. America loves war. China is an extremely peace-loving country. Americans love guns and drugs. Chinese pollution is significantly better than a few years ago. Etc.

In the US, on the other hand, "propaganda" is more closely woven into consumer demand and people's value systems.

If an organization wants to convince you of a message, they don't lie outright, they omit information that would cause you to believe to the contrary.

Let's talk about Iran for a bit. In China, there have been a series of articles about recent terrorist attacks in Iran and evidence that the bombers were supported by US intelligence agencies. I don't have strong feelings about how America should treat Iran one way or another, but I find the notion that we were involved at least plausible. But the headlines in the US papers don't mention possible American involvement. If it is mentioned in the article bodies, it's usually as a passing statement which the reader is likely to casually dismiss ("the Iranian government issued a statement that the US was involved in the attacks").

So the emphasis is different.

If you looked at the NYT on the first day of the Wikileaks stories, they wove stories from the cables, and the story they chose to focus on was how Iran was angering many other nations in the Middle East.

Again, it's a matter of what the media chooses to focus on and what it chooses to neglect. There were tons of potential stories in those wires - why did they choose that one as the most important?

And a lot of information in the US media is conveyed on top of a set of assumptions. When Wikileaks broke, the major news organizations mentioned that not all of the cables were being revealed, as some of the information might have posed a threat to national security. Whose national security? The US's. Why is that necessarily a bad thing? What if the cables had contained information that posed a threat to Chinese or Russian or Iranian national security? Would that have been a bad thing too? Or would that, instead, have been a matter of freedom of speech?

And we can also look at how people in the US choose to consume information that confirms their existing beliefs. Fox News and the Huffington Post. The fact that liberal and conservative news exist at all should tell you that the information inside is politically biased. I think they could fairly be called conservative and liberal propaganda. In these cases, Americans are not bludgeoned by unwanted propaganda, they actively seek it out.

In short, in the US, people actively pursue biased information and news organizations don't blatantly lie, they just emphasize and deemphasize certain facts in accordance with a value system that the consumer already holds. I would call that a more subtle propaganda system than what happens in China.

There are, of course, a few similarities between the two systems as well. A short commercial that says "Support our troops!" may not seem like propaganda to you until you've seen one where there's a Communist flag waving in the background.