Here is the link I am using to test: https://www.paypal.com/cgi-bin/webscr?cmd=_donations&business=vincenkwen@gmail.com¤cy_code=USD¬ify_url=https://mysidte.org/testPaypal.php&item_name=问飞&item_number=0338&custom=打的费
As you can see I set item_name and custom to be Chinese characters. However, in my IPN listener, all these characters are received back as \u001as, though on the checkout page the item_name was correctly displayed.
Go to More Options under Language Encoding