Ethnic conflict is a very common issue in this world. This is because humans, by nature, are social creatures. They form communities and groups, often depending on common identifiers such skin color, language, religion or ethnicity. If these divisions are properly treated, you can easily isolate certain groups from the society and that will just create a festering wound that will only go away if it is forceful cut----which often translates into divisions of territory or eradication of the group in question.
Now, the reason CCP set these policies is very simple. On one hand, they need to establish firm control to properly manage and govern the nation. On the other hand, they also want to soothe relationships between Han Chinese and the other ethnicity and avoid incidents that might create a conflict. These exemptions and benefits are the necessary compromises.