I guess I'll take a stab at it. This is my first answer on /r/askhistorians so feel free to let me know if it needs more.

The idea that Chinese historiography is completely bunk is simply inaccurate. It promotes a very artificial version of Chinese civilisation; it, funnily enough, is more reminiscent of historical understandings of China as a constant, unchanging civilisation that is not in touch with modern understandings of Chinese civilisation.

To begin with, while traditional Chinese historiography considers Sima Qian to be the father of Chinese historiography, Sima Qian is far from being the first sources of history in China. Your friend is missing out on an entire period of historiography featuring works such as the Chunqiu. It wouldn't make sense to me to negate the works and contributions of Sima Qian and onwards, while considering the narrative traditions of earlier works to be more legitimate. It also assumes that Chinese historiographical tradition did not change in China over the course of history. As an example of where this is false, from the time of Sima Qian until the Tang dynasty, for example, historical records were written by individual authors; from the Tang onwards, however, this shifted to a collaborative team effort rather than work by an individual basis.

The basic idea behind this claim about Chinese historiography would assume that a) historical records were only created in an official capacity and b) that the government in charge of this would maintain the same beliefs/motivations. Works like the New book of Tang vs. the Old Book of Tang are clear examples where this is untrue. Modern historians and historical Chinese historians were also not only working off of previous scholarship on Chinese history; they worked with primary sources and materials as well.

Historiography in China, just like in Rome, was very complex and not as simple as "a string of people wrote down the official history as dictated by the emperor and that's it." Rome wasn't alone in having court factions, which is what the crux of the argument sounds like it's claiming. There are numerous unofficial records about various periods and events in Chinese history which can help grant us a deeper understanding of Chinese history. If there was only one official record, there wouldn't be a need to assemble a list of official records in the first place!

So for the scholarly consensus? Any of the major events in Chinese history you're thinking of probably happened in some way or form. It's hard to say what the "scholarly consensus" in Chinese historiography is, other than to say that most of it was true. There was a period of time where it was believed that the Shang dynasty wasn't a real thing, but archaeological evidence such as oracle bones have since been enough to convince most historians that the Shang dynasty existed in some way at the very least (the extent of its power, timeline, etc. I believe are still debated.)

Your friend is completely wrong in claiming that there is a) a lack of counterbalancing in Chinese historiography (well, no more than in any other civilisation's historiography) and that b) Chinese historiography is no better than pure propaganda. It's important to keep track of the biases and the historical contexts in which works are created, but the existence of various accounts and sources of evidence allow us to sift through and create a better understanding of what actually happened. Historians don't just read an official record, translate it, and then claim that that's the end of the story.

Also, the claim that the fake antique industry in China is so good that it can make archaeological evidence indistinguishable from real artefacts is news to me. I don't doubt that there's a fake antique industry of course in China (I'd be shocked if there wasn't,) but I'd need to see some evidence of this amazing industry's ability and also, I don't see how it wouldn't also affect other historiographies and works from other civilisations. Also, to my knowledge, there isn't anything particularly revelational (somebody feel free to correct me) in recent Chinese scholarship, and the common events in Ancient and Imperial Chinese history have been studied and known since prior to the industrialisation and development of Chinese industry and technology, which I would assume would be pre-requisites to the development of a robust and convincing fake antique industry. The entire conspiracy theory lacks (like many conspiracy theories) a clear and logical motive that wouldn't be served by a simpler explanation.

garbage ... the historians cannot be trusted due to imperial censorship ... indecipherable mess ... pure propaganda

How accurate is his argument?

Simply untrue. Much official Chinese history (including to this day) was partly intended as propaganda, but this does not mean that it is worthless junk. It means that the Chinese histories must be treated as potentially biased, but this is the case for many historical sources. It is even the case for many Roman sources - apart from works such as Caesar's Gallic War (written as propaganda), "opposed to the Emperor" means that bias is likely. History written as propaganda can still be very valuable history.

One important feature of the official dynastic histories is that they were compiled by the next dynasty. The results in definite bias against the last emperor (or the last few emperors) of the preceding dynasty. In particular, the loss of the Mandate of Heaven by the previous dynasty due to "bad emperors" is part of the justification of the new dynasty coming to power. Whether or not the last emperors of the previous dynasty ruled well, this political philosophy demands that they are presented as "bad emperors". For earlier emperors - those not blamed for the fall of the dynasty - there is no such requirement. However, there is also no requirement that they be praised, that their mistakes be omitted, etc. that one might find if histories of emperors of the current dynasty were being written.

There are also histories that were compiled by the current dynasty - gaoshi ("state histories") and shilu ("Veritable Records", histories of each successive reign). The offer the opportunity to look for the effects of bias - the biases of the current dynasty writing its own history are not the same as those of the next dynasty writing the history of its predecessor. Many of the Ming Veritable Records are known to be biased. In two cases, they were revised because the earlier version became politically unsatisfactory. In the first of these, the Yongle Emperor twice revised his father's (the Hongwu Emperor, the first Ming emperor) Veritable Records to justify his war against, and overthrow of, his nephew (the Jianwen Emperor, his father's chosen successor). The Ming Veritable Records and their correctness were debated and criticised - Chinese historians and scholars were not blind to bias.

In addition, many private (i.e., non-official) histories were written, especially from the Ming onwards. It is simply wrong to say that all Chinese historians worked under commission of the Emperor.

These different types of histories, each with their own biases, allow corroboration. Further corroboration can be found in archival material. Bureaucracies keep records, and especially from the later dynasties, much archival material has survived. If an official history writes of a war in some place and in some year, and the paperwork allocating the budget for it, arguments for and against the war by officials, imperial orders, etc. have survived in the archives, what reason is there to doubt the event?

Histories were also works of literature, and some care must be taken to distinguish conventional language praising or condemning officials (including last emperors of dynasties) from accurate descriptions of behaviour and events (Franke, 1950).

The lesson is that Chinese histories should be treated with caution. One should not simply uncritically accept everything in them as truth. The official histories often have biases, one way or the other. Private histories can have their biases, too. But Chinese histories are not at all unique in these regards.

For the scholarly consensus on Chinese historiography, there are some useful chapters in The Oxford History of Historical Writing, especially volumes 1 and 3. Scholarly consensus disagrees with "garbage ... the historians cannot be trusted due to imperial censorship ... indecipherable mess ... pure propaganda".

no external sources to corroborate with

For some of it - even much of it - there are no external sources for corroboration. For some of it, there are plentiful external sources, and these make it clear that even the official dynastic histories are in large part reliable. For example, for the Imjin War, Hideyoshi's invasion of Korea in 1592-1598, we have Chinese sources, Korean sources, and Japanese sources. As we expect, the sources are biased, but they generally tell a similar story. For a discussion of the Chinese sources, see Swope (2009).

Archaeological evidence is also invalid due to the massive fake antique industry in China

The fake antique industry makes fake antiques, not fake archaeological sites. Single artifacts without context are not the main basis of archaeology.

References:

Franke, H. (1950), "Some Remarks on the Interpretation of Chinese Dynastic Histories", Oriens 3(1), 113-122.

Swope, Kenneth M. (2009), A Dragon's Head and a Serpent's Tail: Ming China and the First Great East Asian War, 1592–1598, University of Oklahoma Press

To suggest that the entirety of the Chinese historical corpus in particular up to the Late Imperial period is somehow false because of imperial censorship reveals an extreme racist or chauvinist bias, because by that logic we could quite frankly toss out the majority of our corpus of Medieval European chroniclers too if they happened to have royal patronage.

Let's apply the criteria of your friend to some of those European sources. By their logic, Book I of Froissart's Chroniques of the Hundred Years' War, because Froissart had received patronage from Queen Philippa of England and latterly varius Low Countries dukes and duchesses, is pure Plantagenet propaganda, and can thus be discarded. We can't use Horace's poetry or Vergil's Aeneid as sources on the Augustan period because they had imperial sponsorship. The Alexiad? Complete BS because Anna Komnene was a princess. By contrast, everything Tacitus writes must be true because he was a Senator, even though Tacitus loves to include unsubstantiatable contemporary rumours as part of his narrative if they paint an emperor in a negative light (though not without admitting that these are rumours). How on earth you square the Prokopios circle, given the simultaneous existence of the extremely pro-Justinian History of the Wars and the extremely anti-Justinian Secret History, a book which literally claims Justinian killed a trillion people, is beyond me.

In any case, to suggest somehow that a narrative built on senatorial sources is going to be true, while a history based on court sources is not, is especially problematic because senators hated the poor! For the most part, the 'bad' emperors found in Tacitus, Suetonius and Dio are usually down-to-earth men of the people with an anti-senatorial bent but, it seems, popularity among the lower classes. Nero was evidently hugely popular, to quote Dio Chrysostom: 'even now everybody wishes [Nero] were still alive. And the great majority do believe that he still is, although in a certain sense he has died not once but often along with those who had been firmly convinced that he was still alive.' Caligula and Domitian were eager sponsors of the chariot races. While Justinian may not have ingratiated himself to his own senators like Prokopios, that his successor Justin II tried to placate the Blues and Greens by sending 'proclamations to each of the factions, saying to the Blues, "The emperor Justinian is dead and gone from among you," and to the Greens, "The emperor Justinian still lives among you,"' (Chronicle of Theophanes for 568/9) is clearly indicative of Justinian's popularity with the lower-class interests that the Greens represented. The senatorial historians represent senatorial interests, and are not somehow paragons of historiographical objectivity.

Looking at China, to suggest imperial sponsorship somehow invalidates a historian's opinion is absurd. Has your friend read Sima Qian by any chance? Because Sima Qian was absolutely not in the imperial pocket in the way he composed his history, particularly regarding Han Wudi. Sima had in fact been castrated on Han Wudi's orders for appearing to say something he didn't, and after choosing to go through with the punishment rather than commit suicide out of shame, subsequently portrayed the emperor as a brutal tyrant. While the official histories of previous dynasties were always produced under the auspices of the next, plenty of historians operated privately without such oversight or patronage. One such example would be Wei Yuan, a Cantonese scholar of the early 19th century whose Shengwuiji (Record of the Sacred Wars), a military history of the Qing Dynasty that remained a major resource for scholars well into the 20th century, was produced outside imperial auspices. So his argument that all Chinese historians operated under imperial sanction is false, and even if it were there are clear examples of historians bucking the imperial line.

And even if we did assume that yes, all Chinese historians were presenting the imperial line. So what? That doesn't somehow destroy the chronology we have. It would affect what details we know, and have an effect on the way we structure our own narratives, but the plain chronological record of what happened is not going to be significantly altered at its fundamental level by the biases of its authors.

What im more interested in is what has caused this sort of viewpoint to become more 'common'. When i was studying briefly in the University of Auckland a few years back, one of the History teaching staff was quite insistent that the study of History, and History as a idea, is a purely western concept and that the only 'real' history is that of the west or when done in a western style.