Reports: Amazon Web Services exiting China, selling to local partner in $300M deal

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Beijing Sinnet, the local partner for Amazon Web Services’ cloud business in China, has reportedly 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 says Amazon “is throwing in the towel in China.” Reuters is also confirming the deal, saying that the sale will end Amazon’s cloud computing business in the country.

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.”

An AWS representative did not immediately respond to a request for comment.

Operating in China was definitely 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. The AWS in China page is still live as of this writing.

So why is AWS walking away from what will one day probably be the biggest cloud computing market on the planet? It certainly isn’t going out in a blaze of righteous anger, as Google did when it moved its search operation out of China into Hong Kong in 2010 following the discovery that Chinese hackers had stolen source code from the company.

AWS doesn’t break out revenue by region, so it’s hard to know how its Chinese operation was faring. It’s quite possible the company concluded it had no chance of gaining share against strong local rivals and decided to walk away while it could, which will be a good question to pose to AWS executives at re:Invent in a few weeks.