Amazon has denied reports that it is withdrawing its AWS business from China, but the firm did admit that it has been forced to sell some physical assets to its local partner.
The U.S. firm appeared to have exited the country after The Wall Street Journal and Reuters reported that Beijing Sinnet, the partner that operates AWS China, had notified investors of its acquisition of the business for 2 billion yuan, or $300 million.
Some wires have been crossed in process, however, since an Amazon spokesperson clarified to TechCrunch that the firm remains committed to China but was forced to offload “certain physical infrastructure assets” in order to comply with Chinese law.
Here’s the company’s statement in full:
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.
Note: This post has been updated to reflect the Amazon statement
Amazon launched its web services business — better known as AWS — in China in 2014. AWS is significantly ahead of the competition across the world, but in China it must operate via local partners due to regulation while it is up against Alibaba’s ambitious cloud unit and a rival from Tencent. Amazon signed a deal with Sinnet back in September 2016.
The AWS China business had worked with governments in Beijing and Ningxia, and companies that include consumer names like Xiaomi, security firm Qihoo and software maker Kingsoft.
Sinnet said in a regulatory filing that the deal will help the service “comply with local laws and regulations and further improve service quality and security.”
That’s almost certainly a reference to new regulations around data that went live in June and give China’s central government more direct control over the operations of internet-based companies in the country.
This isn’t the first time Chinese laws has impacted AWS.
Back in the summer, Sinnet had contacted customers to warn them not to operate VPN software in response to a government crackdown on services that enable China-based individuals to gain unfettered access to the internet. Apple was among other Western companies to respond similarly to the government’s demands. The iPhone-maker banished VPN services from its App Store in what was one of the largest blows to internet freedom in the country in the modern era.