"Based on a study of the past five Games, the host country wins record high medals at their home Olympics, but their medal total drops dramatically at the next edition," said Cai Zhenhua, vice minister of sports.
"Because a number of Olympic and world champions retired after the Beijing Games, a younger generation will form the bulk of the Chinese Olympic legion," Cai told the state Xinhua news agency.
"Some of our young athletes lack international exposure and consistency, so we cannot be very optimistic about their performances," said Cai, with the Games less than 100 days away.
At the 2008 Beijing Games, China won 51 gold, 21 silver and 28 bronze to top the medal table for the first time.
China's rise as a world sports power has been attributed to generous state funding for training in less prestigious sports such as weight-lifting, shooting, rowing, judo, taekwondo and fencing.
The country has also consistently done well in diving, table tennis, gymnastics and badminton, but has failed to shine in the blue-ribbon events such as football, basketball, swimming and track and field.
"The United States has maintained its overall strength, and countries like Russia and Britain have increased their input in sports, while China is less competitive in some sports," Cai was quoted as saying.
"Our target for 2012 is just to remain in the lead pack on the gold medal table.
"We will face strong challenges in London. It won't be an easy job."
China is expecting to send up to 380 athletes to London.