Cruel? I don't f-ing think so.
If a kid walked up and bit me, and broke my skin causing me to bleed, then they would be lucky enough to leave without being smacked in the face, hard. I have never, ever seen anything like that. If the child was mentally ill, then I wouldn't smack him, I'd just be thoroughly pissed off and frustrated. If it was just a brat, then yea, they are getting a smack.
Definitely not cruel though. If anything, it will teach the kid not to go around biting people and drinking their blood, either for his/her own safety, or for the safety of the ones gnawed on. I don't know if the kid has any diseases, why would I want the scamp to bite me?
It would be different if this wasn't a public situation. If it was the child of friend or family, it would be a different matter. Having someone bite me and drawing blood in their mouth is way at the top of my list for, "Things to avoid in public".