USA e-commerce heavyweight Amazon.com will sell equipment for its Chinese cloud services to a local partner to comply with new laws that have tied the hands of global operators reliant on the free flow of data. 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.
China's internet safety laws, which entered into force in June, require domestically gathered customer data that is stored locally or removed from the country to be screened by authorities.
But Amazon said that it is only selling "certain physical assets" and still owns the intellectual property for AWS worldwide.
Amazon is committed to establish in China, and is looking forward for significant business opportunities and growth potential for the next few years.
Chinese regulators are tightening rules on foreign data and cloud services, including new surveillance measures and increased scrutiny of cross-border data transfers.
One analyst based in Beijing said that the move by Amazon was mostly due to regulatory compliance. 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.
Sinnet told its customers in August it would be shutting down its VPNs and other network services that allowed its users to circumvent the "Great Firewall System" of China that controls censorship, citing the government's direct instructions.
Amazon's decision casts a shadow over similar ventures in the country. Oracle, Microsoft and IBM also face hard new regulatory challenging for localizing their own data storage units. It said instead it was selling hardware to comply with laws that forbid ownership or operation of certain types of cloud technology. Sinnet said in the filing that the deal will help the service "comply with local laws and regulations and further improve service quality and security".