Tablix stores internally all strings in the UTF-8 encoding. You can use any encoding for the XML configuration file, as long as it can be converted to UTF-8 by your libxml2 library. Remember to declare the encoding of your file in the XML prolog. For example:
<?xml version="1.0" encoding="iso-8859-2" ?>
The XHTML output always uses UTF-8 encoding and is in strict compliance with XHTML 1.1 standard. It should preserve all non-English characters that are used in the XML configuration.