The company's Chinese partner, Beijing Sinnet Technology co, has purchased the assets for $300 million but Amazon will retain the intellectual property.
"In order to comply with Chinese law, AWS sold certain physical infrastructure assets to Sinnet", said AWS earlier today. "We're excited about the significant business we have in China and its growth potential over the next number of years".
Chinese regulators are tightening rules on foreign data and cloud services, implementing new surveillance measures and increasing scrutiny of cross-border data transfers.
AWS first launched a China service in 2014, but must operate via local partners to comply with Chinese law, with companies required to store data locally in legislation enacted in June. Moreover, the deal would help to "comply with China's laws to further improve the company's AWS cloud services" based on quality and security. AWS runs a separate hardware venture in collaboration with the Ningxia provincial government in China's northwest, according to Reuters.
Sinnet has told customers it has been told by the government to close VPNw which circumvent the Great Firewall. Microsoft Corp, Oracle Corp and IBM Corp are also facing tough new regulatory challenges in localizing their data storage units. Some U.S. -based trade groups say that China has repeatedly lent deaf ears to the requests by U.S. firms on giving access to Chinese markets just like the Chinese firms get in the U.S. However, the Trump administration has hardly done anything to address the issue.
In recent year, cloud services are becoming a crowded and major competitive domain in China.
Amazon was a late entrant to the Chinese cloud market which is dominated by local players like AliCloud and China Telecom.