A funny anegdote for all of you: My finnish lecturer once told us about the book. After reading that book some reporter asked the author about the gender of the main character, since "hän" does not specify gender, and the answer to the question was... "I don't really remember"
There is a big debate in English about gender which has some of us very hot under the collar and is far from resolved. "They" is one option for a single individual, and it may work for an adult. However, we still have "it" and although that may be old-fashioned, one could argue for "It is a child". We have not been told yet whether hän can also mean "it", but that would certainly solve the problem for Finnish.
You can use "se" (it) instead of "hän" when you refer to people, but only in spoken language. In many regions it's more common, in fact.
When written Finnish was being developed, it was decided that "hän" would refer to people and "se" to animals and things. However, this distinction hasn't really ever been a thing in spoken Finnish, at least not until people started adopting the norms of written language and insisting that they should apply to spoken Finnish as well.
That would be "se on lapsi".
However, funnily enough, Finns often use "se" instead of "hän" in spoken language when they refer to people, so in an normal conversation you could easily hear someone say "se on lapsi" in the sense "he/she is a child". I personally use "se" nearly all the time, "hän" only sarcastically or when I want to be very respectful, but there is some regional variation, meaning that you can hear "hän" more than "se" in certain places.
The differentiation between "hän for humans and se for non-humans" was intentionally created in the 19th century for the written language. In spoken dialects, the rules have always been vague. Usually se has been the most common word with hän being somewhat marked (see Kielikello article Se ja hän puhutussa kielessä).
I think the problem in the sentence "it is a child" stems from resistance from English rather than Finnish (in my experience, many - although not all - English-speakers consider "it" for humans dehumanizing and malicious).
In informal spoken language, personally I use se for humans probably 80-90% of the time. Using hän usually has a reason (sarcasm, respect, "se" already being used in a different meaning in the same sentence etc.)
How do you tell: this is genuinely a difficult question. You need to know how a particular person usually speaks and listen carefully for their tone and extralinguistic clues. There are people who use hän for almost everything and people who use se for everything but insist on using hän for...their pet dog. For learners, I believe the most important thing is to be aware of both options and remember that in written and formal contexts, the hän/se divide is still very clear and relevant.