What you mention here does not contradict my assumption that there is a finite set of valid characters in every language, unless there is a rule in chinese that

What you mention here does not contradict my assumption that there is a finite set of valid characters in every language, unless there is a rule in chinese that lets you assemble an infinite set of meaningful characters/symbols (unicode could still represent only a finite subset of those, though). Either one or both of the characters you mention are probably part of the script of the users language setting in chinese; if the character is then it should be rendered as unicode and if not as punycode. If the users language has this kind of ambiguity then they are the only ones to judge if the domain name is correct or not, but at least they are familiar with the language and do not see characters they might have never encountered before and/or need to deal with an ambiguity that they shouldn't even have to expect to begin with. The idea I proposed would still protect someone with a chinese language setting from being tricked by e.g. a cyrillic character in an otherwise ASCII domain name. I don't see how that is euro-centric (apart from ASCII being inherently english-centric), it is an overall improvement over the status quo no matter where you live and what language you speak.