When Jack Ma, the Chinese internet entrepreneur, visited investors in the US a few months ago, he was taken aback by their sceptical view of his battle with eBay for control of China's market in consumer-to-consumer online auctions.

"Everybody said: 'It sounds like Jack is fighting with Mike Tyson - he has no chance'," recalls Mr Ma, the slightly-built founder and chief executive of e-commerce company Alibaba.com. "I was so disappointed."

But the ebullient Mr Ma is not letting such lack of faith get him down. He says Alibaba's one-year-old consumer auction arm, Taobao.com, is taking the fight to eBay's China unit, Eachnet. And he claims that Taobao already has more users than eBay in China.

The contest between Taobao and eBay in the consumer auction sector reflects a broader battle in China's rapidly emerging online market between the world's biggest internet companies and homegrown competitors.

It is a high-stakes prize-fight. With more than 80m people online, China is already one of the world's most populous internet markets and is growing at more than 30 per cent a year. Many analysts say the country's huge population and rapid economic growth are likely to give it a pivotal role in the worldwide web's future development.

Underlining international interest in the market, eBay paid $180m for Eachnet, then China's dominant consumer auction website, in a deal completed in 2003.

Yahoo, the US internet portal, has also been active, paying $120m for Chinese language search developer 3721 Network Software last year and setting up a joint-venture online auction website with local rival Sina.com.

Meanwhile, Google, the world's most widely-used internet search engine, has launched a Chinese language advertising service and taken a stake in Baidu.com, its Chinese counterpart.

The technological and financial resources commanded by such companies make them formidable opponents, as Mr Ma well knows.

The former English teacher says that, over the last year, eBay has been willing to spend heavily to seal exclusive advertising deals with China's most visited websites, forcing Taobao.com to rely heavily on word-of-mouth campaigns and clever publicity to attract new users.

"They blocked all our advertising," he says.

But Mr Ma says that international internet companies are prone to making three mistakes in China - underestimating the differences between the local market and the US market, incurring higher costs than local rivals and "going global" too quickly.

"The cost for eBay and international companies to come to China is so high," says Mr Ma. "They spend $100m, we spend $10m, but the effect is the same." Low costs and strong cashflow at its parent Alibaba mean Taobao can rapidly develop a customer base by offering its services free, he says.

It helps that many Chinese internet users stick to local brands. Yahoo's local portal is overshadowed by the locally run but US-listed Sina and its rivals Sohu.com and Netease, which have pioneered a highly profitable mix of services such as mobile telephone messaging and hugely popular fantasy role-playing games.

Google's investment in Baidu reflected the Chinese company's unmatched popularity among local users.

Chinese online retailing is currently dominated by local "would-be Amazons" Dangdang.com and Joyo.com.

The success of local companies reflects an ability to understand the tastes of local internet users while also working around such difficulties as the very limited use of credit cards.

It is far too early to write off the foreigners. Some analysts say their deep pockets will allow them to catch up through further acquisitions.

Foreign investment is already a reality for many of China's homegrown champions, through Nasdaq listings and venture capital investments. Alibaba, for example, raised $82m from investors, including Japan's Softbank Corp and Fidelity Investments of the US.

Whatever their ownership, Mr Ma is convinced local roots and local knowledge give China-based companies a big advantage over their international rivals.

"They are the sharks in the ocean, we are the crocodiles in the Yangtze River," he says. "When they fight in the Yangtze River, they will be in trouble. The smell of the water is different."