She is definetely overhyping this. IMO the number given is hugely ovestimatedbut to say that half of China's rural children are so stunted they have lower average IQs than any developed natio
Plus even if there is still a small number affected there are various ways to mitigate the problem. Such as shifting these people to manual labour/factories or service-industry jobs with low requirement for education and critical thinking. You dont need to be a genius to do labour work so in this way the state is not damaged by this.
Finally, China not having a Democratic system also means that these low-IQ individuals cannot affect policy. Contrast that with India, and you see how bad things go with an uneducated/low-IQ population given the right to vote for candidates and policies.
To sum up, her whole argument is invalid, and even if it was true, China has inherent ways to mitigate the problem. PR at best