Are authors of Chinese fantasy novels able to create names for fictional creatures/races?
It is true that, compared to Chinese, English (and related languages) have an advantage in its alphabet and rules of pronunciation, such that you can easily make up new words by creatively arranging letters. Certain letters and syllables can evoke different feelings or cultures, which gives authors tremendous creative flexibility, and is exploited by great conlangers. The Chinese analogy is usually not possible, as readers can't figure out how to pronounce it, plus it would be a huge hassle for typesetting, which explains why you almost never see made-up Chinese characters.

Not that it never happens though; as Stan mentioned it used to be done for mythical creatures, for example the characters in the famous 麒麟 (a sort of chimeral-unicorn-deer creature) are almost never used for other words. More recently, some netizens created a character for the Jackie Chan / Duang thing, but since it's impossible to type it, who knows whether that will stick.

Instead, what Chinese authors can do is creatively combine known characters to create new words. Although this is a far cry from the flexibility afforded to made-up English words, the fact that Chinese is disyllabic means most characters typically have many meanings, which makes the meaning of fictional words ambiguous, and it is this special ambiguity that can add flavour to those words. For example, the fictional sword "倚天剑" has multiple translations and meanings, without it being clear which one is right. 倚 could mean rely or close to, 天 usually means heaven but could also be a metaphor for royalty. Therefore, you could variously translate the sword as "Heavenly Sword", "Heaven Reliant Sword", or "Royal Sword", "Sky-scraping Sword"...