This is why you should never settle for anything less than a formal written agreement - without having a document signed by all parties involved that outlines the exact terms of the agreement shit like this is inevitable.
I suspect what Xiao8 had with Newbee was similar to a service supply agreement, where he was contracted to provide Newbee a service over a 2 year period of time, compensated in this case with a salary.
I don't know jack shit about Chinese law but typically in those cases if one of the parties breaks the contract they will be required to compensate the other for the financial loss they sustain as a result, for example if party A has a contract with party B to provide a service for a 2 year period but breaks the contract after 1 year and party B sustains a loss as a result then party A will be required to compensate for this loss, but they will not be required to compensate them for the entire remainder of the contract, so for example if this was an IT service and party B had downtime that cost them $20k until they could find another party to provide the services then party A would be liable for covering these costs, but they will NOT have to compensate the entire valuation of the contract for the remaining year, which could be hundreds of thousands of dollars.
Just spitballing on the 800k number it would seem that this is the value placed on the entire remainder of Xiao8's contracted tenure, not the actual financial loss to Newbee. Given that he was retaining a salary while not providing the agreed upon service he should be liable for that expense, which would be substantially less than the 800k, as well as other contested financial losses.
TL;DR I expect they will be able to settle this for substantially less than 800k, which seems to far exceed the loss to Newbee, and they will settle this otherwise they're stuck in their own legal rut having to continue to pay Xiao8 a salary.