Interesting point of view, I think that is hard to establish a limit about how bad should be an app for being removed. Maybe malware only or if the app don't do the intended function.
in my opinion, google should never remove an app that is just bad quality. Thats what the app's rating already exists for. if the app is promoted and if people will download it. Everything they do, makes it more difficult for independant devs, that cant follow Google's new policies which they come out with every two months.
The more I think about it, the more I believe that you are right. If an app is not malware, shouldn't be removed. Also this could be a way for censorship.