It's merely nonsensical reduplication to make the meter match "blow your house in." This reduplication is a feature of English. Look at fiddle-faddle, hurly-burly, wishy-washy, namby-pamby, etc. The only sense I can make of "chinny-chin-chin" is that it sounds like childish taunting, like calling an obese playmate "Fatty McFatterton."
This means the anatomical feature, the chin, the point of the jaw on a person. This is understandable, even to the young children to whom this story is typically first read to - usually even young children know what a chin is and that it is a place where hair grows. As for why "chinny chin chin," rather than just "chin," the writer is being cutesy here, to appeal to children, and to be poetic a
Diminutives in English are formed by adding "y". Diminutives are common in the speech of children, especially for the names of some domesticated animals.