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Do you just want to read? Or to produce a Chinese epub?
If you just want to read, I wouldn't mess around with embedding fonts. I don't know about the Kobo Wifi specifically, but in general, Kobo devices can use user-supplied fonts. There is a script on Mobileread called "koboify fonts" if I remember correctly, and that will help you to make sure that the font you choose will work. Then you put those font files into a /fonts directory on the device.
If the epub has a body or paragraph font specified inside, then you have to remove those styles so that you can choose your own font.
Hope this helps.
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