Something horrible happens, a great injustice is done, powerful people get away with abusing that power, corruption continues and the weaker people must suffer for it — and that’s the way of things. In Chinatown, in the country, in the world.
"Forget it, Jake. It’s Chinatown" means "you can’t change things, it’s the way things are and the way they will be, regardless of how much you tilt at windmills." The line is about the futility of fighting injustices and darkness in the world. It’s about giving up and looking away, because nothing can be done anyway lest you become another casualty of injustice.
Chinatown is the world. Jake is everyone. Forgetting about it is what we all do anyway, and so what we may as well keep doing.