PostgreSQL 7.1+ screw up Chinese Encoding after JDBC

Jeff Liu (liu(at)WonderfulSolutions(dot)com) reports a bug with a severity of 1
The lower the number the more severe it is.

Short Description
PostgreSQL 7.1+ screw up Chinese Encoding after JDBC

Long Description
I can read Chinese Encoding (gb2312) using select statement manually
in psql after I installed PostgreSQL 7.1 or 7.1.1. However, my JDBC
select statement returns incorrect Chinese Encoding (screw up the
whole Chinese encoding). I did recompile postgresql.jar (JDBC driver)
for my new version of PostgreSQL. I have to go back to my old version
of PostgreSQL (7.0.3) to have correct Chinese Encoding. Very sad!
Configuration I have:
Redhat 6.1 + Linux 2.4.2 kernel (I did recompile the kernel)
Java: IBM JDK 1.3.0
gcc: version egcs-2.91.66 19990314/Linux (egcs-1.1.2 release)
PostgreSQL: recompile 7.1 and 7.1.1 with --enable-multibyte and --with-java options.

Sample Code

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