Chinese Internet sector companies have capabilities to create innovation that will shape internal market, and could have significant impact on global competition. These capabilities are based on several important factors. Probably the most important of these factors is huge capacity and dynamic growth of the internal market. Companies located in smaller countries do not have such possibilities of growth, because their internal markets do not have sufficient capacity. Chinese Internet software developers can grow on internal market to the size that gives them possibility to compete with global corporations and expand to international markets. Second most important factor of Chinese Internet sector competitiveness is of thousands of computer science graduates that enter Chinese labor market every year. Wages of software engineers in China are much lower than in western countries, so Chinese software developers have considerable cost advantage over their global competitors. Third factor of Chinese Internet software developers competitiveness is the support of government that is successfully using censorship laws to exclude foreign competition from local market. All those factors make Chinese Internet companies highly competitive and enable them to enter international markets. Case studies of Alibaba, Tencent and Baidu prove that Chinese companies can not only dominate local market, but also successfully compete with global corporations.