The category named System Data (or Other) is a general category that measures the storage space used by all Apple and third-party files that don’t belong to any more specific category.
The system will use space as it sees fit to make the machine work better for you. Much of that is probably purgeable, meaning that if you ever reach a point where you need space, the OS will free it up for you.
You are not lacking for free space. I wouldn’t worry about it. Modern operating systems are very advanced and manage resources well.
Here is Apple’s take:
Learn what to do if your Mac startup disk is almost full, or you don't have enough storage space to download, install, or copy.

support.apple.com