http://rt.com/news/third-gender-birth-germany-592/

"The new law will apply to intersexuals, also known as hermaphrodites, rather than transsexuals. Hermaphrodites are people in possession of both female and male physical characteristics."

So it's not a question of "letting your child decide," per se. It's based on situations where the gender is unclear at birth. THEN, I guess they let the child decide.

http://youtu.be/QHZR9SA5pOg