It looks like Amazon is removing itself from the Chinese cloud services industry on account of stringent new data laws that went live in the country earlier this year.
The 2 billion yuan (US$301.2 million) transaction was arranged in order to comply with national security laws that prevent non-Chinese companies from owning certain critical infrastructure assets, including those involved with the delivery of cloud services.
Chinese regulators are tightening rules on foreign data and cloud services, implementing new surveillance measures and increasing scrutiny of cross-border data transfers.
"In order to comply with Chinese law, AWS sold certain physical infrastructure assets to Sinnet, " an AWS spokesman said today, adding AWS would still own the intellectual property for its services worldwide.
"This move is mostly around regulatory compliance", said Charlie Dai, Beijing-based analyst at Forrester Research.
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.
However, like its peers, Amazon has found it hard making headway in China, which is dominated by local tech giants Alibaba and Tencent Holdings Ltd. Laws that came into effect in June require firms to store data locally. Foreign firms there have long complained about local restrictions that appeared to favor domestic players. Companies targeted by the regulations are required to carry out a security self-assessment or obtain approval from the relevant regulator before transferring the controlled data overseas.
Amazon shares acquired 50 cents to $1,129.67 mid-morning Tuesday.