You can argue that the testing Google does is bad or minimal, but it seems like the ideal solution would then be "improve the testing". I'd also prefer to see such tests moved on-device so they could apply to APKs from any source, but I don't know how technically feasible that'd be; depends on how they're doing the testing, I guess.
"Android" (by Google) takes a reputation hit when someone downloads malicious APKs from anywhere, including Google's store. Google, therefore, wants to reduce the availability of bad apps in their ecosystem; maintaining an app store that enforces their standard of quality is one approach to accomplishing this goal, dissuading unknown apps they can't vouch for is another.
Obviously, there are both pros and cons to these approaches (from both Google and the end-user's perspectives), and they could definitely be improved, but they accomplish a concrete goal of "reduce malware on Android".
Yes why would we believe Google on the APK scanning? There's zero transparency on this subject, zero code shared and the store is visibly full of scams anyways.
Edit: Sorry, didn't read to the end of your comment. Yeah doing it on-device would be good but I'd guess there's some stuff they want to keep secret.
