How to convert html entities in Oracle?
The chinese characters are decoded correctly with utl_i18n.unescape_reference.  In fact they just aren't displayed properly in your query result which might not support those special characters.

You can confirm that with this SQL Fiddle. 

It is the client which is respsonsible to display the characters appropriately.  If the client can not display a character it may show an upside down question mark, something else or just plain garbage. 

So by now, the real question is where do you want to display this string...