Amazon Agrees to Sell Some Cloud Assets to Chinese Partner

Amazon's AWS business is reportedly pulling out of China

Beijing Sinnet Technology Co. will buy servers and other unspecified "operational assets" in the country's capital from Amazon Web Services for as much as 2 billion yuan ($302 million), it said in a filing to the Shenzhen stock exchange.

"In order to comply with Chinese law, AWS sold certain physical infrastructure assets to Sinnet", a spokesman for the cloud-services unit said on November 14, adding AWS would still own the intellectual property for its services worldwide. As a result, in order to comply with Chinese law, AWS sold certain physical infrastructure assets to Sinnet, its longtime Chinese partner and AWS seller-of-record for its AWS China (Beijing) Region.

Amazon was a late entrant to the Chinese cloud market which is dominated by local players like AliCloud and China Telecom.

"‎We're excited about the significant business we have in China and its growth potential".

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"This move is mostly around regulatory compliance", said Charlie Dai, Beijing-based analyst at Forrester Research. Sinnet asked its customers earlier this year to stop using virtual private networks, which are able to circumvent China's Great Firewall. 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.

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.

Amazon's decision casts a shadow over similar ventures in the country.

With Alibaba's cloud services expanding rapidly, it looks as if China is resolved to sit on its own cloud. Chinese firms account for roughly 80 percent of total cloud services revenue in China, and roughly half of the data centre market in 2017, according to Synergy Research Group.

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