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I really don't know about that. Mercedes used to mean high, tactile, audible mechanical quality. You'd hear it while closing the doors, you'd see it when looking at perfectly assembled dash, you'd hear it while driving and you'd be happy with it when clocking 500k miles with just regular maintenance. I remember those cars - I think the quality started tanking around late 1990s.

Right now its just ok. My friends S class has visibly mis-aligned buttons (a 200k car). My other friends electric S-class bean-thingy has squeaking doors (a 2 year old, 120k-when-new car) and feels surprisingly cheap to touch and drive. Sure, small sample and all of that but I don't think those are exceptions.

I only drove one Chinese car, and it was just a normal experience - what I'd expect from a volvo, bmw, or audi. Good UI on the infotainment, was below average annoying. No big difference vs. a merc. For sure not a qualitative difference in levels of refinement.

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While I am also a fan of having knobs and switches with that nice mechanical quality, I think we're not really part of a majority. YoY sales dropped "only" 9% for Mercedes passenger cars, so people are not that bothered by the lack of knobs.
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Are you sure about that last sentence? Plenty of Chinese EVs are as refined as luxury brands, such as seen here: https://youtu.be/xiFmuoBIyjQ
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I'd love to have some of these cars in my local market, but at 3:15 this guy explicitly makes the comparison and says they're not up to Mercedes-Benz level.
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If you watch the entire video you see that this remark is just a minor nitpick on one of the dozens of cars in that video. They could very easily replace that piece of plastic wood by real wood to fix it.
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The fact that it'd be easy to replace strengthens the negative signal. If they're cutting corners in a highly visible portion of the car which would have required no additional engineering to do right, they're probably cutting more corners in ways that are harder or impossible to see. No review video will reveal, for example, whether they used a poor quality adhesive or the button labels show visible wear within months.
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If you review 10 cars and 1 turns out to make a questionable choice for some minor aspect, then suddenly the car is bad, and not only that, all of them are bad? Sorry but if the German car industry thinks like this it is just grasping at straws.
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