It had become something of a ritual. Every three years, the OECD would release the results of its PISA exams, which are given to hundreds of thousands of students in dozens of countries. And every three years, an American freak-out would ensue as Chinese students seemed to be outperforming their U.S. counterparts by a wide margin.

In 2009, Shanghai students did so well — beating the world in math, science and reading — that President Barack Obama declared it a "Sputnik moment," requiring immediate action. A similar panic broke out in 2012. But this year proved to be a surprise. The results from the 2015 tests, released this month, showed Chinese students ranked sixth in math, 10th in science and 27th in reading. What happened?

On one hand, the answer is simple. Instead of merely testing Shanghai's elite, the 2015 exams included a broader selection of students across China, which dragged down scores. But the results also highlighted an important problem: China's much-lauded education system remains riven by inequality, with far-reaching consequences for schools, students and, ultimately, the economy.