TL;DR: I'd argue the main contributors are (a) the pandemic, (b) being released in competition with multiple other Mulan movies, and (c) the westernized Chinese culture.
An obvious factor here is the pandemic. Many cinemas in China had been closed for months, and when they reopened, seats looked like this:
A photo I took of cinema chairs in a Beijing cinema on the 24 July 2020; we can see social distancing regulations. Different cinemas had different regulations, and they eased up over time.
I saw 花木兰 on the 12 September 2020 in Beijing, and the social distancing requirements had eased since then. However, I feel people were not in a "business as usual" mindset: they still felt it was unsafe to go to the cinema, and people were cutting back on luxuries.
A second practical factor I think is important is that there were multiple Mulan movies released this year. In fact, when I first heard of the "new Mulan movie", I thought it referred to Matchless Mulan 无双花木兰 (full movie) which appeared a few months prior. The animated Kung Fu Mulan 木兰：横空出世 was advertised at the same time as Disney's Mulan. Furthermore, movies are easily accessible in China without going to the cinemas, e.g. through an Internet TV, or through downloading them off the Internet (although this was the same for prior movies).
(There was several political controversies at the time, but I expect these were just minor issues.)
Beyond external factors, from critiques I've read, Chinese audiences especially hated the westernized Chinese culture. Along with other westernized movies, it is mocked using the phrase 文化左宗棠鸡 = "cultural General Tso's chicken":
During this upsurge, "cultural misappropriation" is a sensitive and hard-to-avoid topic, with "Crazy Rich Asians", "Mulan", etc., all encountering criticism from Asian audiences for Hollywood's "cultural General Tso's chicken". Westerners make seems-right-but-actually-wrong mistakes regarding Asian cultural stereotypes.
亚洲电影将取代好莱坞？, 12 November 2020.
The idea that "one Chinese character = one word" (such as on Mulan's father's sword) is how Westerners end up with meaningless Chinese characters tattooed on their bodies: Chinese simply doesn't work like that.
The concept of "qi" is treated like a superpower in the movie, yet in reality it is considered something that everyone has (we might go see a doctor about it). The movie throws away Mulan's arduous hard work and bravery for "she has qi" which she possesses from childhood. Moreover, the idea that a "woman + qi = witch (which are inherently bad)" is not part of Chinese culture: everyone has qi. Chinese has a notion of 女巫 which is sometimes translated to "witch", but it's not the same.
...this movie contains the vague concepts of "qi" and "witches", as if the special point of Hua Mulan is not that she's a woman that survives in an all-male barracks, fights bravely for victory, and destroys sexual prejudice, but that she is born with the "qi" superpower and is the chosen one.
Comment on Douban (5 September 2020)
The concept of a phoenix rising from the ashes is not how Chinese phoenixes (凤凰) work:
The Fenghuang is often called the Chinese Phoenix, which makes it seem like a Chinese version of the Phoenix of Greek mythology, a bird that would repeatedly die in a burst of flames and then be reborn from the ashes, representing rebirth. This name is misleading, as the Fenghuang and Phoenix only share some superficial similarities.
The Phoenix in Chinese Mythology
I'd also guess that having an all-Chinese cast speaking English to one another is also off-putting for Chinese audiences.