Beijing Sinnet Technology said Tuesday it would buy parts of Amazon's (NASDAQ: AMZN) cloud business in China for up to two billion Chinese yuan ($301 million U.S.), but the US e-commerce giant said it was not exiting the world's second-largest economy.
"AWS did not sell its business in China and remains fully committed, " the company said in an emailed statement. Thus, to comply with the Chinese law, it sold "certain physical infrastructure assets" to Sinnet, who has been operating the Amazon services since August 2016.
"Chinese law forbids non-Chinese companies from owning or operating certain technology for the provision of cloud services", the USA firm said.
Amazon said that it will sell few physical assets only and own the intellectual property of Amazon Web services (AWS) worldwide.
"This move is mostly around regulatory compliance", said Charlie Dai, Beijing-based analyst at Forrester Research.
China has tightened up its tech regulation recently: for example, a new Chinese cybersecurity law came into force on June this year. AWS runs a separate hardware venture in collaboration with the Ningxia provincial government in China's northwest, according to Reuters.
Beijing Sinnet Technology, Amazon's partner in China, told customers months ago to stop using illegal virtual private networks (VPNs), which can offer secure, private networks for users, but also circumvent internet censorship in the country.
In recent year, cloud services are becoming a crowded and major competitive domain in China.
Chinese firms account for roughly 80 percent of total cloud services revenue in China, and roughly half of the data center market in 2017, according to Synergy Research Group.
Amazon shares acquired 50 cents to $1,129.67 mid-morning Tuesday.