I'm not making myself clear am I :-)
The error message you got did NOT come from your localhost.
When you connect to a mysql server, php first tries to only connect.
Then it tries to login using username and password.
In MySQL, access rights are defined by username, password and hostname.
This hostname is not the hostname of the mysql server, but the hostname of the server that wants to connect to the mysql server.
You say there is no mysql running on your machine, so php would not be able to connect to localhost at all, so there would be a "cannot connect" error if your php script tried to connect to your localhost.
Intead, you get an "access denied" message, which means that php was able to connect to the mysql server 203.96.16.106, but the username/password was not correct for your host (202.10.82.84).