The 18-year-old started against the English champions and came close to scoring twice at the Etihad Stadium.
Potter was impressed by the homegrown star’s all-round game in just his second appearance for the club on Wednesday night.
“I really enjoyed his performance,” Potter said at the Etihad Stadium. “He took responsibility, took the ball in tight areas, attacked the box, and could’ve scored a couple of goals on another day.
“So it was a really nice performance, a mature performance, I thought. He is a quiet lad but goes about his work. I’ve been really impressed with him.”
Ultimately, the Blues will be frustrated after suffering three defeats in their last four games which sees them sliding down the Premier League table and out of the cup.
Their performances have undoubtedly dipped in recent weeks but Potter saw progress despite defeat against Pep Guardiola’s imposing side.
“I thought there were quite a few positives,” he added. “Obviously, we’re disappointed with the result but in terms of how we played, we created some good chances, there was a better structure and performance level.
“The team looked closer to what we want it to look like [compared to Arsenal]. The boys had great courage and they tried against a top team.
“Their goalkeeper got man of the match and I think that tells a little bit of the story. But overall, I think it was a step forward for us.”
Guardiola and Potter were seen in a prolonged conversation after the match, highlighting the mutual respect between the two coaches.