utf-8 encoding is better in your case...

utf-16 encoding takes too much space and look terrible in non-unicode aware text editor.

utf-8 is good for occasional out of basic multilingual plane chacaters as it preserves US-ASCII character and can be read by non-unicode aware text editor.

Another option is to use AppLocale to lauch notepad (or other editor) with Chinese as native character set (GB2313 encoding).