open dict://“$word” stopped working for Chinese after upgrading to Big Sur
This seems to be a bug with the open command when handling certain characters—for instance, open http://www.google.com?q=中 gives a similar error message. It might be worth reporting this bug to Apple; in the meantime, you can use the following (admittedly less than elegant) workaround:
osascript -l JavaScript -e &quot;(a = Application.currentApplication()).includeStandardAdditions=true; a.openLocation('dict://' + encodeURIComponent('中'))&quot;

This uses JavaScript for Automation to encode and open the URL, just as open does. To use the generic $word format, you would just make the following substitution:
osascript -l JavaScript -e &quot;(a = Application.currentApplication()).includeStandardAdditions=true; a.openLocation('dict://' + encodeURIComponent('$word'))&quot;