It can lead to serious problems so I would definitely get your sister to take your niece to someone who is an expert in the area. I have put some info from the vic government website here that might be relevant.

Early warning signs
Children can become fussy about particular foods or lose weight for lots of reasons, but it is important to get any concerns checked out. Some signs that a child might have an eating disorder are:

* An intense fear of gaining weight.
* Denial of being hungry.
* Deceptive behaviour around food ? for instance, throwing out or hiding school lunches.
* Avoiding food.
* Compulsive exercising and a need to be active all the time.
* Eating in secret.
* Cutting out particular food groups, such as meat or dairy products.
* Developing food rituals ? such as always using the same bowl, cutting food up into tiny pieces or eating very slowly.
* Behavioural changes ? such as social withdrawal, irritability or depression.
* Sleep disturbance.
Some place to go for help

Professional help
If your child is preoccupied and unhappy with their body, or seems to be developing behaviours like restricting their eating, then professional advice may be helpful. See your doctor for information and referral.

Where to get help

* Your doctor
* Your local community health centre
* An accredited practising dietitian, contact the Dietitians Association of Australia
* Psychologist.
* The Eating Disorder Foundation Victoria (03) 9885 0318 non mtro callers 1300 550 236 Eating Disorders Foundation of Victoria - HOME