Beijing Sinnet Technology Co. will buy servers and other unspecified "operational assets" in the country's capital from Amazon Web Services for as much as 2 billion yuan ($302 million), it said in a filing to the Shenzhen stock exchange.
"AWS did not sell its business in China and remains fully committed", the company said in an emailed statement.
To comply with Chinese legislation, however, Amazon sold certain physical infrastructure to its local partner.
The spokesperson added that the company was excited about its business in China and its potential for growth.
One analyst based in Beijing said that the move by Amazon was mostly due to regulatory compliance.
It looks like Amazon is removing itself from the Chinese cloud services industry on account of stringent new data laws that went live in the country earlier this year.
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Last year Amazon signed a deal with Sinnet so it could operate its services in China, most notably Amazon Web Services. AWS runs a separate hardware venture in collaboration with the Ningxia provincial government in China's northwest, according to Reuters.
Amazon controlled over 40 per cent of the global market for public cloud services in 2016, well ahead of Microsoft Corp and Alibaba, according to Gartner estimates.
Amazon announced its China AWS region back in December 2013, and noted at the time that, to comply with China's legal and regulatory requirements, it was working with local companies, including Sinnet, who would provide the necessary data centre infrastructure, bandwidth and network capabilities. Foreign firms there have long complained about local restrictions that appeared to favor domestic players.
Big name tech companies in the US often bend over backward to either attempt to penetrate the highly protected Chinese market, or maintain a somewhat established presence.
Amazon shares acquired 50 cents to $1,129.67 mid-morning Tuesday.