From what I can remember, the movie was received horribly. People criticized how the movies confused China with Japan (which is a big deal for us), and how they confused Chinese tradition of family clan with Native American (mostly because use of the word "ancestors" in the movie). And people aren't happy about how the emperor bows to Mulan at the end of the movie, which is ridiculous in Chinese culture, and everyone hated Mushu the dragon the same way people hated Jar Jar Binks a year later.
They didn't like the love interest between General Lee and Mulan (which was never in the original Mulan legend). They didn't like the jokes, the songs ... how Shan Yu attacked the capital city with a small team...
Overall, we just didn't like it.
But I think it's not so much that the movie is bad; I personally like the movie a lot. It's more about culture differences. After all, Mulan wasn't even trying to preserve Chinese culture. It is a straight out American movie decorated with Chinese accessories to make it interesting and exotic. Kung Fu Panda did a much better job.
On top of that, I think deep down Chinese feel upset because we didn't do it. Mulan is our legend, and we didn't do anything about it that's nearly as cool and beautiful. It's like you have this hidden treasure somewhere, and you're too lazy to use it, while someone else steals it and makes good use of it. A lot of people asked, after watching Mulan, why can't we do stuff like this? We have so many legends, stories, and what do we have for animation and cartoon?