Best practice for SEO urls(ASCII vs urlencoded UTF8)?

Question

I'am building a website where I need to make an url form article title. First option is to convert all utf8 to ASCII. This can be done, because every language has some kind of Romanization available. But I don't know if, for example, for Chinese people romanticized versions of title makes any sense. Second options is to urlencode utf8 title like Wikipedia does: http://ar.wikipedia.org/wiki/سيارة.

What are pluses or minuses for both options? which version is better to use?

Answer 1

Google, for one, has no problems indexing and listing sites with Unicode characters outside of 7-bit ASCII.