yes, it is true that you should exit Mainland China and enter again when stay duration per entry expires, for example, you get a one year multiple entry L visa visa with 30 days stay duration per entry, you have to exit China when 30 days stay duration is up. You can have a try to apply for Residence Permit within Mainland China, but you need to get the Company Business License, an visa notification letter from local Foreign Affairs Office and an work permit issued by Ministry of Labor and Social Security.