Are chinese characters allowed to be entered in URLs?
As tested, chinese characters are able to be entered in URLs, and it will convert to punycode as well and send
All non-ascii characters that presents in domain name will (should) be converted to puny-code. It is browser's business to display it as a hieroglyphs
Punycode exists to be able to use non-Latin scripts in non-supported software. So whilst I like my site http://見.香港/ I can enter http://xn--nw2a.xn--j6w193g/ if I cannot enter the Unicode original form.
Some website developers program overly defensively, for example with Google Apps you cannot use punycode domains at all due to aggressive white listing that has not updated with ICANN standards.