you are not better than him. Lots of interships are unpaid

But, the company won't ask interships to do a real work anyway. Real estate agents do open house for free to exchange for the customer contacts and experiences. What you have done is to block other chinese opporttunties, since he would not hire the same kind of people anymore, If your friend agrees to tryout without pay, your friend should stick with it. I do  no say the boss is right neither.