The company's Chinese partner, Beijing Sinnet Technology Co LTD, revealed that it would buy AWS' public cloud computing unit in China for just over $300 million in a recent filing.
According to press reports, Amazon is only selling "certain physical assets" and the deal will allow Sinnet to better comply with Chinese laws. Amazon confirmed that it will sell a certain physical property and it still owns the intellectual property for AWS worldwide. "We're excited about the significant business we have in China and its growth potential".
Due to compliance issues, Amazon began operating AWS services in 2016 through its partner Sinnet.
Chinese regulators are strengthening the rules on foreign data and cloud services.
"This move is mostly around regulatory compliance", said Charlie Dai, Beijing-based analyst at Forrester Research. If the company intends to continue functioning in China, it has to cooperate with local partners, that often have some degree of government oversight, an AWS spokesman explained. This year in August, Sinnet told customers that it would shut down the VPNs and other services on its networks that helped users to get over China's Great Firewall.
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Amazon's decision casts a shadow over similar ventures in the country.
The new law also says that China-based data must be stored locally. In July, Apple dismissed VPN services from its app store in China.
Whereas the European Union sees foreign cloud services as a source of revenue - fining them billions whenever they can think up some legal infraction they may have committed - China is obliging foreign cloud service providers to sell their assets to China-based companies which come under state control.
Amazon was a late entrant to the Chinese cloud market which is dominated by local players like AliCloud and China Telecom.