Modern game engines have already developed native Chinese font solutions, with no technical barriers. The Chinese pixel font you mentioned has long had mature solutions in many pixel games, such as Minecraft.
Moreover, foreign games with Simplified Chinese do not participate in domestic censorship in China. And in the situations where you mentioned being prohibited by law, the vast majority of cases of illegal bans are not rooted in Chinese translations.
And I think this is a business fact that everyone should be aware of: if you don't localize, it's basically equivalent to completely giving up on this market. This fact was not proposed by me, but by commercial studios that developed masterpieces such as The Witcher III and Cyberpunk 2077.
I believe that the core value of localized translation has never been to "make games explode overnight", but to steadily improve basic business data. If you are unwilling to do even the initial localization translation, how can you make Chinese people willing to play your game?
Moreover, having Chinese for free games will greatly enhance community activity, and active players are the core source of paid content in the future. To seize the Chinese market for similar games, local translation is almost necessary.