That is the expected behavior. There isn't any unicode support in the Empeg firmware. Your Chinese language playlists and MP3 tags will not show up.

I don't know the extent of unicode support in the 3.0 Alpha firmware. I think there might be some code in there for it, but it doesn't work 100 percent (IIRC), and there's no Chinese font. I think someone supplied a half-working Chinese font once, but I seem to recall that it was more of an experiment than a full implementation.