"Chinese law forbids non-Chinese companies from owning or operating certain technology for the provision of cloud services", the USA firm said.
"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.
"AWS sold certain physical infrastructure assets to Sinnet", it said. Amazon has not yet provided the reason behind this exit, but it may be due to the tightening rules on foreign data and cloud services by Chinese regulators.
Beijing Sinnet Technology said Tuesday it would buy parts of Amazon's (NASDAQ: AMZN) cloud business in China for up to two billion Chinese yuan ($301 million U.S.), but the USA e-commerce giant said it was not exiting the world's second-largest economy.
"In order to comply with Chinese law, AWS sold certain physical infrastructure assets to Sinnet", an AWS spokesman said on Tuesday, adding AWS would still own the intellectual property for its services worldwide.
Sinnet has told customers it has been told by the government to close VPNw which circumvent the Great Firewall. In China, regulations require Amazon to operate via a local partner before offering the services to customers.
Charlie Dai, a Beijing-based analyst at Forrester Research, feels that the move was necessary for AWS to improve its other business areas in the market.
Big name tech companies in the USA often bend over backward to either attempt to penetrate the highly protected Chinese market, or maintain a somewhat established presence. AWS runs a separate hardware venture in collaboration with the Ningxia provincial government in China's northwest, according to Reuters.
More recently, telecoms equipment giant Huawei announced plans to take on AWS and Alibaba with its own cloud platform.
China favors domestic firms over foreign ones with paternalistic policies.
AWS launched in China back in 2013, partnering with both ChinaNetCenter and Sinnet at launch.