They are exploring every possible gap in the market that might lure consumers: multi-language translator apps for travelers, vending machines with an online payment systems, taxi apps that allow people to order cabs over the Internet, and fetal movement monitoring apps that can record babies' heartbeat... If you can imagine something, someone is probably working on it already.

"The Internet is a hypercompetitive market. The rules are clear here. Private capital has easy access and is heavily involved," said Ramon Zeng, principal of the US venture capital firm DCM.

On the flip side, the startup rush will help to alleviate China's employment problems. In 2013, about 7 million college graduates flooded the labor market. Many will end up starting their own businesses or landing a position in the thriving IT giants.

Alibaba has created 3 million direct jobs and over 100 billion indirect ones, and the number will keep growing, according to Liang.

Another big online retailer Jingdong hired more than 30,000 delivery men, most of whom are migrant workers, said vice president Zhao Guoqing.

Meanwhile, good news from the government may also give a boost to the industry. Recent guidelines from the State Council, China's cabinet, said Internet-related consumption of information products and services is expected to reach 2.4 trillion yuan in 2015, with an annual growth of over 30 percent.

The government promised to lower market barriers, and to strengthen fiscal and financing policy support for the sector.

The impact of Internet industry has just begun, said Gao Xinmin, vice president of the Internet Society of China.

" It will be ubiquitous in a few years. It will revolutionize all industries, and catalyze China's economic rebalancing and industrial upgrade."