Updated 10:35pm: Amazon Web Services responded to reports out of China that it was exiting the country’s cloud computing market with the following statement.
From an AWS representative:
No, AWS did not sell its business in China and remains fully committed to ensuring Chinese customers continue to receive AWS’s industry leading cloud services. Chinese law forbids non-Chinese companies from owning or operating certain technology for the provision of cloud services. 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. AWS continues to own the intellectual property for AWS Services worldwide. We’re excited about the significant business we have in China and its growth potential over the next number of years.
The situation emerged Tuesday night when Beijing Sinnet, the local partner for Amazon Web Services’ cloud business in China, reportedly issued a statement announcing that it had agreed to buy Amazon’s China cloud computing operation for $300 million.
The surprising deal was first reported by The Wall Street Journal, citing a “stock-exchange statement” that could not be immediately located. The WSJ initially reported Amazon was “throwing in the towel in China.” Reuters also confirmed the deal, saying that the sale would end Amazon’s cloud computing business in the country. Both publications have since corrected and clarified those reports.
Chinese law requires foreign cloud computing companies to run their services through a local partner that is responsible for conforming with China’s internet laws. The WSJ quoted the company as saying the deal would allow Beijing Sinnet to “comply with our country’s laws and rules and further improve the security and the service quality of the AWS cloud-computing service operated by the company.”
Operating in China is a tricky balance for AWS, caught between U.S. mores for how internet services should be managed and China’s strict laws on internet data. The company was caught up in a controversy earlier this year when Beijing Sinnet was forced to tell customers that they could no longer use virtual-private networks on their cloud services to get around Chinese restrictions on the internet.
That tricky balance has allowed homegrown tech companies to dominate China’s cloud computing market. Alibaba is the AWS of China, with about 40 percent of the market in 2016 according to IDC, trailed by China Telecom and Tencent.
AWS signed the deal with Beijing Sinnet in July of last year. AWS doesn’t break out revenue by region, so it’s hard to know how its Chinese operation is faring, but the asset sale is the latest twist in what will one day probably be the biggest cloud computing market on the planet.