It simply decodes the entities. It doesn't then encode the character using UTF-8.

If you want all non-ASCII characters encoded, you can use:

use HTML::Entities qw( encode_entities_numeric );

sub handle_char {
    my $self = shift;
    my $x = shift;
    print encode_entities_numeric($x);
}
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There's also a handler you can use instead of Char that receives the entities still encoded, but then you're not guaranteed to have all non-ASCII characters encoded.