> You can take out $50k per year
Try buying a house with 50k a year... This is exactly what the "scheme" solves. You have new immigrants who have (in many cases) legitimate money (e.g. by selling property back in china) but cannot move it out of the country quickly due to capital controls on the chinese side.
Since mortgages are meant to spread out costs over time, it's the perfect solution. However, banks (understandably) care about income rather than existing capital. So you have a lot of "safe" customers who are unlikely to default
and less sensitive to interest rates (compared to the local borrower pool), and banks looking for customers amidst high interest rates... You can see how something like this can easily arise from these conditions...
> you don’t need money laundering to get money out of china into the USA
I cannot comment on what your situation was (maybe through a business?), but AFAIK it is very hard to move capital out for regular individuals. Your realistic options to wire out capital are just "education" and "tourism". While technically you can claim "investment", it will almost always not be approved and cause a watch to be put on all your accounts.
That being said, usually documentation of the funds outside of china is completely legitimate and above board. There is no need to fake this. The only paperwork magic that needs to happen is towards the chines government... However, it still _looks_ like money laundering because you can only wire $50k a year, so many need to resort to wiring from accounts of different individuals (friends and family) to different individuals, despite the funds already being fully documented and reported outside china.