Christmas is not a national holiday in China, but employers often give foreigners anywhere from a day to 2 weeks around Christmas.
I am not aware of any law forbidding this or requiring this - just as there is no law regarding whether employees get their birthdays off. Rather than risk getting into an argument over this, I insisted on having a line in my contract specifying that I get the day off. If someone had come to me claiming there was a law against getting birthdays off, I wouldn't believe such a claim without seeing a copy of the law.
If this holiday was in the contract or was time off applied for and granted before being taken away from them, your friends should ask to see a copy of the relevant regulation. If one cannot be provided, your friend should visit the local labor bureau and ask. Even though you aren't directly involved, you could visit the labor bureau yourself to check whether or not this claimed law exists.
Please make sure to come back and let everyone know if the employer finds this highly improbable regulation or if it turns out to be nothing but a BS attempt by the employer to steal back some promised time off.