>They end up funding a bunch of upper middle class's children because it turns out those children are well-equipped to perform higher on merits.

I'd argue they are well equipped to give the appearance of merit, rather than performing higher on actual merit.

That's not true.

We can easily look at countries like Vietnam and Thailand where the merit is basically exam-based. Extremely difficult to cheat or "give the appearance".

The upper middle class's children perform very well. The top universities are full of these children. They are the top of the country. They are math/computer/science olympiads

If you are too rich, then the children are too spoiled. If you are too poor, then you don't have time and space to study nor access to private tutors.