Amazon Sells Cloud Assets in China Due to New Rules is selling its hardware from its China based public cloud business amidst the tightening of regulations over data online that has created a big roadblock for tech firms that operate in the second largest economy in the world.

Sinnet Technology Co. in Beijing, which is the Chinese partner of Amazon, said in a Monday filing that it would purchase the U.S. company’s Amazon Web Services public cloud computing business in China at a price of as much as 2 billion yuan or $301.3 million.

A spokesperson for AWS said Tuesday that to comply with the laws in China, AWS sold some physical infrastructure assets to its partner Sinnet, adding that AWS would remain the owner of intellectual property for its worldwide services.

The spokesperson added that the company was excited about its business in China and its potential for growth.

Regulators in China have tightened rules on cloud services and foreign data, implementing new measures of surveillance and increasing the scrutiny of data transfer that cross borders.

Laws that took effect during June require companies to store their data locally.

One analyst based in Beijing said that the move by Amazon was mostly due to regulatory compliance. He added this move was necessary for AWS to increase its other areas of business within the market.

AWS has another hardware venture with the provincial government in Ningxia located in the northwest region of China. Amazon said via a post on its website that its China public cloud services were managed exclusively by Sinnet.

Amazon’s China based cloud business already had been facing tough rules due to the tight controls China has on the internet.

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.

The move places a big shadow over foreign ventures of a similar nature in China. Oracle, Microsoft and IBM also face difficult new regulatory challenging for localizing their own data storage units.

Multinational companies doing business in China, including Apple, have transferred data in 2017 to Chinese companies that are overseen by local governments. Microsoft has its Azure cloud services operating in partnership with 21Vianet Group, which is based in China.

Analysts said they expect other foreign companies like IBM and Oracle, to ensure compliance with regulators if they want to provide services such as public cloud in China.

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