"In order to comply with Chinese law, AWS sold certain physical infrastructure assets to Sinnet", a spokesman for the Amazon.com cloud-services unit said on November 14, adding AWS would still own the intellectual property for its services worldwide.
According to press reports, Amazon is only selling "certain physical assets" and the deal will allow Sinnet to better comply with Chinese laws. It said instead it was selling hardware to comply with laws that forbid ownership or operation of certain types of cloud technology.
"AWS sold certain physical infrastructure assets to Sinnet", it said.
Amazon launched its web services business - better known as AWS - in China in 2014. "We're excited about the significant business we have in China and its growth potential over the next number of years".
Amazon controlled more than 40 percent of the global market for public cloud services in 2016, well ahead of Microsoft Corp. and Alibaba, Gartner estimates. In China, regulations require Amazon to operate via a local partner before offering the services to customers. Sinnet urged its customers to avoid using virtual private networks (VPNs), which outsmart China's Great Firewall. 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.
With Alibaba's cloud services expanding rapidly, it looks as if China is resolved to sit on its own cloud.
The arrangement between Amazon and Sinnet appeared to mirror a similar set-up between Microsoft and its local partner 21Vianet Group Inc, according to IDC China managing director Kitty Fok.
"We expect other foreign players, such as Oracle and IBM, will also ensure regulatory compliance as long as they want to provide public cloud services in China", said Dai.