Assuming the student had certified his eligibility for treaty exemption with the school, a 1042-S would have been issued with code 20 in place of a W-2 and the income should not be reportable on Line 8 but just needs to be disclosed on Line 22 (in conjunction with Item L).  This would mean the last column for Item L should be left blank.

You would only offset Line 8 if the employer reported the income on a W-2 (likely because the student failed or was late to submit the required certification), in which case, the student will need to offset that income and ascertain the eligibility now.

The US-China DTA does impose a limit of $5,000 on the exemption under Article 20(c).