The reason they don't allow kids below 16 in gymnastics is that, the younger kids have a higher tendency of getting injured as compared to the older ones. Plus, the younger ones have more flexibility, hence the better performance. You don't see a 30 year old gymnast very often and there is a reason for that.
The rules are there for a reason and everybody should follow them. I believe she is 16 when her government says she is. But if she is not, and it is proved, it will be a disgrace for China.
Personally, I don't care if they played a fetus. If the fetus wins, hey, that is amazing. If it loses, no harm done, its just a fetus. If it dies or injures itself, AWESOME. Kids deserve that.