"AWS did not sell its business in China and remains fully committed, " the company said in an emailed statement.
Specifically, the cloud computing division called Amazon Web Services (AWS) is giving up "certain physical infrastructure assets to" Beijing Sinnet Technology Co, like computing equipment, reports Reuters, citing an Amazon spokesman.
"AWS continues to own the intellectual property for AWS Services worldwide". In June of this year, new laws came into effect that now require all foreign businesses operating in China to store their user data locally and this has been a cause for concern among global companies currently doing business in the region.
"This move is mostly around regulatory compliance", said Charlie Dai, Beijing-based analyst at Forrester Research. AWS is significantly ahead of the competition across the world, but in China it must operate via local partners due to regulation. This year in August, Sinnet told customers that it would shut down the VPNs and other services on its networks that helped users to get over China's Great Firewall.
Cloud services have become a crowded and competitive field in China in recent years, with Alibaba Group Holding Ltd's cloud unit opening over a dozen overseas data centers since 2016.
Whereas AWS is the public cloud leader globally, it has struggled to crack a Chinese market that has traditionally been served by its own tech firms.
Amazon's decision casts a shadow over similar ventures in the country. 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.
Foreign firms in China have long complained about local restrictions that appeared to favour domestic players.