If taken at face-value, that means students can't make any mistakes in their last year of high school. That's across two semesters worth of tests in several subjects. Imagine if failing a test worth 10% of a course was enough to prevent you from going to a good university because it dropped your average across 6 courses from a 98% to a 97%. (10%/6 = 1.67%)
Some teachers will give easy tests that are difficult to not get 100% on. Other teachers will make up the numbers entirely.
Regardless you still have to spend time and money on extracurriculars since the 98% is a bare minimum. This means student activities and clubs aren't for socializing. They have been co-opted as a mechanism to create 10-person executive bodies so students can show they had leadership roles when applying to uni. A club that actually meets for its stated purpose imposes too much of a time commitment since competitive students need multiple leadership roles on their application.
The University of Waterloo has an entire series of math competitions as a sneaky way to administer standardized testing to potential CS or math students. This gives them a competitive advantage over other schools. Waterloo also has a comprehensive dataset of "adjustment factors" to weigh your average differently depending on your high school. This has been in place for a decade.
Schools like the University of Toronto force you to apply to computer science after your first year. They admit everyone but only a small amount of students get to continue into high-demand programs such as CS (this is called POSt). This incentivizes you to sabotage your classmates to look better, especially when many classes' grades are curved. Why would you attend a study group and help your competitors? This creates a high-pressure and negative environment. e.g. Three people killed themselves in the same computer science building at U of T in the two years before the pandemic.
https://www.thestar.com/news/gta/students-criticize-u-of-t-a...
Our top universities select for undergraduates that are skillful at creating fake leadership roles for themselves and sabotaging others to look better by comparison.
At least standardized tests require you to study.