For example, in swimming, only two participants per nation are allowed. Some of the swimmers who got the 3rd place in US National Trials could even win bronze, but they cannot participate.
More often the case, there is only one national team allowed for a relay or team event. So even if China has 300 times the population of New Zealand, it can send the same number of teams and is limited to a maximum of one medal per event.
The methodology is biased against larger nations with a good pool of athletes.