How to paste Chinese/Unicode characters to Terminal?

I'm trying to paste some Chinese: 你好世界 to my Terminal, but instead I've got ^L or some other weird characters.

The same happens for other unicode characters (such as £āēīōūśṣṭēīōū) when pasting or pressing Option+e, then a for á, e for é, i for í and similar, then I've got C!C)C- instead.

In Terminal Settings, I've got Character encoding set to Unicode (UTF-8) (Settings/Profiles/Advanced) and in Encodings tab I've UTF-8 enabled.

I've LANG=C, however setting it to LANG=en_GB.UTF-8 doesn't help.

However it works when I run echo:

$ echo -e "\xE2\x98\xA0"
☠

My Terminal settings are:

I'm using bash.

How I can configure Terminal to support Unicode characters?