The red background symbolizes the blood that was shed during the revolution. The yellow symbolizes the Chinese people as 'Yellow people' that comes from the Soviet Union. The larger of the stars represents leadership and the four smaller stars represent the four classes of people underneath the leader I.E. The workers, the peasants, the petty bourgeois, and capitalists sympathetic to the Party.
Yellow is the noblest color in China. In Chinese tradition, only Chinese emperor can wear clothes in yellow that were called Dragon Robe. Also, yellow is the symbol of centre.