The CPI takes these quality factors into account. Not everything has increased in quality, either. For example cars are much more durable than they used to be, but appliances are much less durable.

Your point about Chinese doing better is a good one, and it's the central issue. The American working class has taken it on the chin to lift the Chinese worker out of poverty. As a side effect, the American capitalist has done very well. On a global scale, this is probably a net good, but the world doesn't get to vote in American elections, and Americans are entitled to a government that prioritises American citizens' interests over Chinese citizens' interests. The Chinese certainly are prioritizing their own interests... If you want to see what this looks like globally, this is an interesting chart: http://www.economist.com/news/finance-and-economics/21707219...