Keep in mind that this is from the perspective of a long fist circular system
My school has 5 different levels of sparring. This way we can minimize the risk of concussions better. Kids stay within the first 3 levels (attack only, defend only, beginner) Attack only and defend levels = beginner student vs intermediate or advanced student. This allows the beginner to find their control without worrying about hurting a fellow beginner student. Beginner level = beginner student vs beginner student. At this point students have the ability to hit lightly at a higher percentage.
Intermediate level is for students who are now able to pull punches. In my opinion pulling punches is a skill within itself because you have to be able to see your attack far enough in advance to be able to make the decision on the spot to either let it fly or take some or all of the power out of a punch at moments notice. Students master this skill so that they can use it in Advanced sparring when necessary.
Advanced level sparring - This is the highest intensity that students will go against each other. This requires all of the skill sets learned in the lower levels before. At this level we try to keep the intensity under 70%. This is based on what is minimum acceptable intensity for a pulled punch. At this level we expect that our partner will be able to interfere with a punch enough so that it doesn't land solid or at full force. If we that a power punch is going to land without resistance then we pull the punch. The punch still lands hard but it doesn't land anywhere near what it would have if the student didn't pull the punch.
#1 Rule: Too many hits to the head = pulled from sparring that day. If we see that someone is just eating punches then we pull them from sparring that day. We take it as they are having an off day and their mind is not focused on the task.
#2 Rule: Sparring when exhausted is not allowed - We do kung fu which means sloppy techniques can result in serious and permanent injury. If I can no longer control the accuracy of my low shin kick then my sparring partner is at risk for having their knee permanently damaged, all because I was sloppy and tired. When a person is exhausted they are no longer concerned about control as they are mustering every remaining amount of strength to just throw simple punches. Being exhausted doesn't mean that punches will be weaker. Being exhausted means that punch becomes more difficult.
In my mind I think boxing and MMA are able to punch safely when exhausted because of the paths that the punches usually take, but for Kung Fun and other striking martial arts, we throw a wider range of punches that take different flight paths, and that's where the danger lies.