Translation:A small child can become nervous if it is not allowed to laugh.
Along with using gender-inclusive (aka neutral) pronouns, when necessary or comfortable, dropping pronouns altogether to avoid a taboo is common in my culture. So, "a little child can become nervous if not allowed to laugh" sounds fine to me. Though, I don't know how it is perceived elsewhere.
As for he/she, it still expects a child to be gendered. The world is a big place and those pronouns don't cover all of the bases. For example, I'm agender. Use of those pronouns excludes the possibility that I am the topic of the sentence, unless it is shown by context that the speaker is mistaken but intended for me to be the topic. I know for a fact that in Sweden, he/she misses a portion of the population as well. But, we might not have learned that if we hadn't run into a sentence that asks us to do something unexpected in order to prepare for a language and culture that are not our own. :)