Their economy is literally less developed. Country size has nothing to do with it; India is on track to surpass Japan's GDP but no one would dispute that it is much less developed than Japan or any other OECD country.
No, if it was just a matter of having a well developed economy whose fruits are distributed poorly, then their GDP per capita (literally economic output divided by people) would be high.
But it's not. It's among the middle-income countries, just below Malaysia. Which seems about right in terms of the quality of life of the average citizen.
Yes. That means Chinese households actually consume less than this graph indicates. In other words, because China's economy is more manufacturing heavy, this graph makes it look more "developed" than it actually is.