"Just because you are assuming"
I wouldn't be so certain about my thought processes above.
If you weren't assuming that then your mind wouldn't be boggled because you'd realise there is nothing weird about them using 外国人 to describe us even in our countries.
I think you may be having trouble with the meaning of the phrase 'boggles the mind,' which can mean to
'bewilder or astonish with complexity, novelty, or the like,'
Thus, it could 'boggle the mind' as to the sheer novelty of the cultural presumption of a China-born individual calling a white person the closest word (in general use) to foreigner even while he is in his land of birth.
I know what boggles the mind means. There's no reason to be boggled at a Chinese person using a word in the correct way according to its definition and common usage. Your mind would only boggle if you translate it to the English "foreigner" and then think to yourself "he's calling me a foreigner in my own country! Ridiculous!". He's not calling you a foreigner he's calling you a 外国人 and they don't mean the same thing.
It's like being shocked that Chinese people call themselves "China-man" (中国人) because Chinaman has racist overtones in English.