Photoshop, starting with Version 6, is one of few Adobe applications with good support for Windows IME.
I have little experience with Chinese, but I have had no trouble using Windows IME in PS 6/7 for Japanese -- this with U.S. English Windows OS's and Photoshop. And I know of other PS users who have had success with Windows IME and Chinese.
Are you using an appropriate Unicode font?
I forget what choices were available at the time one installs PS, but make sure all the necessary Cmap files for Asian language support are installed.
=-= Harron =-=
I think the cmap file Adobe-GB1-4 is the one used to server the purpose. I have version 1.001.