This information is correct. Same if you apply for one in Hong Kong. To translate what this is:
- You need to own real estate in China OR
- be married to a Chinese person OR
- have received two single-entry visas before
AND you have to be able to prove either of those. If you cannot, you will receive a single-entry visa to China only. Once you've used that, you can apply for another. After that, you will have fulfilled the 3rd condition and can apply for a multiple entry visa.
I also checked my old passport now. I had to get 2 single-entry visa first before being able to get a multiple-entry despite being a Hong Kong resident (not a HKG passport holder though) AND applying in Hong Kong. This was 7 years ago, but still.
They are coming from the position that they will not give you a multiple entry visa until they know that you are likely to return into China to actually use it and that you did not overstay your last visa.
If you have a business relationship in China (i.e. an invitation etc), or come across a friendly embassy employee, you might get a multiple entry anyhow. But as of the rules, you will not. China has a lot of such rules, and always some ways and occasions to get around them. But I have a strong hunch that you as a backpacker, showing up randomly in Malaysia at the consulate, chances might be much slimmer than having your corporate PA make an appointment with the embassy for you at the consulate in the capital of your home country, if you get my drift.
Regarding the requirement to apply from your home country, Wikipedia states for example:
In the majority of cases, visa nationals (persons not citizens of
China) are required to apply for a Chinese visa in their home country
at the Chinese foreign mission (embassy or consulate) or through an
appointed visa agent, prior to entry into China.
The website travelchinaguide similarly states:
Application in a Third Country & Regions
Travelers often need to obtain visas while en route, in another
country, for example, you are Austrians, you can also apply at Chinese
Embassy in Berlin, Germany. While it is possible to obtain one in this
situation it has become more difficult recently. Some offices do not
accept appliations from persons who are not resident in the country
concerned. In some cases having a visa for that country is considered
OK, but this might be of no help if you are in a country where you do
not require one.
There is no simple answer to this issue, nor is it clear exactly why
this rule exists. The first option is to try at every Chinese
Consulate that you pass in the hope that one will grant one. Another
possibility is that if you can manage without your passport for a
couple of weeks, you express mail or courier your passport and
application to a friend or agent in your own country and have it sent
back to you after it has been issued.
There was a major issue for some months when China even blocked foreign Hong Kong residents from getting visa in Hong Kong. This was only temporarily (I think during the Olympics). Many people had to travel home to Europe, India and the USA to apply for a visa. This has been relaxed later and now foreigners can apply in Hong Kong. However, you might still be having issues applying for a visa from outside your home country, depending which officer you run into, and what your reasons for travel are etc. Your best bet will be most likely to do so from Hong Kong in any case.