I was having this issue of displaying Chinese characters in Joomla. It's funny because Joomla 1.5 is supposed to support UTF-8. After a few investigations, it seems like the issue is with the database creation, not Joomla.

This problem happened when I installed Joomla with Fantastico. By default, when you create a new Joomla installation with Fantastico, it creates a MySQL database with 'Latin' locale (it's identified as latin_swedish_ci in the Collation option). The right collation should be utf8_general_ci.

I've tried to change the collation of the database to utf8_general_ci, but changing that would not affect all the existing tables.

What you need to do:

1. Create a dump of the database
2. In the dump-ed SQL script, find all DEFAULT CHARSET=latin1 and replace with DEFAULT CHARSET=utf8
3. Re-create the database with the modified SQL script
4. In existing Joomla's Global Configuration, goto 'Server', change the 'Database' parameter to point to the new database

This should do the magic!