Demihuman Niches in Racially Diverse Nations

So often I have found demihumans and other races to have a hard time fitting into my games in believable ways. It is either always human-dominated with the elves, dwarves, and halflings just kind of there or it is the cosmopolitan mixture where anyone could be of any race. Now making your setting just different kinds of humans could fix a lot of this, but a lot of players like to play demihumans and other races. So I thought it might be interesting to have different races fit into the various societies of my world in specific ways. Some examples follow:

The Defunct Dragon Nobility of the Mandarinate of Qin (Dragonborn)

The great empire of Qin was said to have been established by Zhonggua the Wise, an ancient dragon who deeply involved himself in human affairs. He was succeeded as Dragon Emperor by a dynasty of humans which bore his blood. Humans with dragon blood often appeared more like dragons than men, and from the Imperial tree sprouted many noble branches, each ruled over by the dragonborn, tracing back their lineage to Zhonggua. Zhonggua had established a system of many ranked officials, creating a bureaucracy to counterbalance the fiery tempers of his descendants. 

The highest of these officials, the mandarins, however, began to take more power. Zhonggua correctly expected ambition and impulsiveness from his children but did not expect the ambition of the common bureaucrat and unexpectedly overlooked the complacency that can come with all your needs being cared for until you are under the control of people who serve you. The mandarins ousted the Imperial family and the nobility from any kind of official power, wielding them as figureheads, delighted to grow fat and be served hand and foot, keeping them complacent and powerless while the Mandarins expanded their bureaucracy to an iron machine of oppression for the common man. 

The question remains: is it better to be ruled by the fiery tempers of dragons or the cruel apathy of the middleman? 

Young impetuous dragonborn nobility might easily escape this life of luxury for a life of adventure only to find the world is much more difficult than anything they ever encountered in their pampered lives.

The Empire of Usefulness (Dwarves)

Everyone has their place in the Artisinate of Tibullus. A group of dwarves cast out from their mountain home for their radical ideas about the potential for centralized control to maximize productivity founded a nation in a lush land surrounded by the sea. In their world, everyone has a color and an assigned seal. From birth, every dwarf is put through rigorous aptitude tests to see where they belong in society. At the age of 5, the process is concluded and the dwarf is assigned their color and their starting seal. The different Crafts each have their own color and each specialization within that craft will get you another stripe of color on your sash and a different seal. Each person's seal clasps their sash together over their shoulder and contains everything you need to know about them, including their rank as a craftsman and their specialization and their name and family. Each one also has an identification number.

This is a rigorously ordered world and other races are only permitted to be Citizens if they can prove their usefulness and pass exactly 25 different licensing tests. Indeed the Tibullun word for Citizen is "Useful One." Everyone else that might sneak their way in are the "Useless." Rights are not really a thing, though Citizens do have some privileges often increasing as they increase in rank. Anyone that can prove themselves adept at a craft has a place in Tibullus and can climb the ranks as quickly as any other. They only care that you are Useful. This is an attractive prospect to some members of the other races, particularly humans and gnomes. Tibulluns tend to think that everyone besides them, but particularly elves and halflings, is frivolous and disorderly.

The whole society is a machine dedicated to increasing the wealth and power of the state. No one really owns anything. The state engorges itself on external markets even though the Merchant Craft is distrusted for the independence necessarily entailed for their independence. Although all profits are to return to the state, many merchants, having a taste of life beyond Tibullus skim off the top to enrich themselves. 

Paintings and poetry are passed in dark alleys like drugs. Art elevating the glory of the state is permitted and encouraged, but anything individual, personal, meaningful only to you is frivolous. Games are especially looked down upon, although practice games like those that help train market speculation, memorization, and following orders are permitted. There is a game that might seem strangely out of place to outsiders but is well-loved by Tibulluns wherein the rules of the game change to increasingly more ridiculous and frustrating ones as the game progresses. This might sound supremely frivolous but the more you can be expected to follow whatever the state demands of you, no matter how ridiculous, the nobler you are by Tibullun standards.

Demonsplicer Slumlords of the Steaming City (Tieflings)

Deep in the hissing bowls of the Steaming City, home to many alchemists, wizards, and any others who wish to create without limits, an infestation of demons has naturally developed. Summonings gone wrong, hell portals opened, dimensional rifts all of these semiregular occurrences in the Steaming City have the potential to let through demons into the undercity, a labyrinthine world of pipes, vents, and grinding gears. Demons must play smart to avoid the Dimensional Pest Control units which patrol the lower levels. 

Many humans find their way down here. Maybe they risked it all on a business venture that fell through. Maybe they are just failed wizards with few prospects. Maybe they are the children of the great alchemists above but with no talent themselves. Maybe they are just the huddled masses who have come to the Steaming City to find warmth in a cold world. Demons of significant enough power level can hide among the human refuse and offer their demonic essence as a way of attaining power to those who have never tasted it. 

These demonsplicer covens are changed by exposure in various stages. Longer exposure or generations of exposure lead to more and more obvious demonic transformation. The demon doles out its essence to those that serve it well, becoming the patriarch of a new kind of family, composed of the rejects of society. It leads its adopted children to steal magical resources and perform mass summoning rituals or create demon-engines, capable of opening a portal to the hells. 

The child who is not embraced by the village will burn it down to feel its warmth.

Conclusion:

I think the main point of this exercise was to show how I think you can integrate the fantasy races into your setting in ways that are not just the usual: "This is the Elf Nation and this is the Human Nation." Or the other usual: "In this city, anyone of any race can be found." Neither of those options is wrong and can be done well, but I think some cool things can happen when you contextualize the different kinds of people in your setting. 

If players want to play a specific race but don't like your backstory for them, tell them they come from a far off land, a blank spot on the map that they can define as they play, so when they interact with your setting as is, there can be some interesting reactions. Even if they want to play in the setting but just a character that would be highly unlikely to exist, it's ok because adventurers are weirdos. Once again, that just sets up more cool interactions between the weird players and the "normal" examples that will be found in the setting.

I think this kind of information can drive creativity and help players find where they would like to fit into the setting. As is always the case, they may choose to play someone that really goes against the grain, but that is ok. The richness of a believable world is often improved by juxtaposition.