The 18-year-old defender was linked to a move away from the club during the summer after breaking into the 1st team towards the end of last season.
However, Richards agreed a new long-term deal with the Blues and has gone on to cement his spot in the starting line-up.
He has been rewarded by playing for England's Under-21s, but despite an impressive start to the season, it was still a surprise to see his meteoric rise continue with a call-up to England's senior team, just 8 months after making his 1st league start.
"All concerned, including Micah's family and agent, can take credit for him being here. Agents get bad press but last summer they wanted Micah to be a City player and to stay here as long as possible," Pearce told the City website.
"The rate of improvement we have seen from him since the reserve team games this time last season has been outstanding. I still think there is a lot more to come."
With Gary Neville injured, Richards is set to make his England debut in Wednesday's friendly with Holland, becoming the youngest City player to play for England and England's youngest-ever defender.
City boss Pearce believes Richards' call-up shows City youngsters don't habe to move elsewhere to achieve their ambitions - and that they can keep improving here too.
"Micah knows that he doesn't have to be with one of the really big boys," Pearce added. "Playing his football with Manchester City is a fantastic way of getting into an England squad. That gives the whole club a lift.
"Football is football and everyone sniffs around everyone else's back door. I am forever sniffing around at lesser teams than Manchester City.
"The fact that some of our better players are being looked at by so-called bigger clubs, that's to be expected. That means the Academy's doing something right and more importantly the player himself is doing something right.
"It all comes down to asking: is Micah enjoying his football here? And the answer is yes. Is he improving game by game? Again yes. Is he getting coached well to help him improve? Yes."