Online retail giant Amazon has disclosed that it is disposing of hardware belonging to its Chinese public cloud business. This comes amidst the tightening of online data regulations in the second biggest economy in the world.
Amazon’s partner in China, Beijing Sinnet Technology has made a commitment to acquire the e-commerce giant’s cloud computing unit at a price of $301.2 million. The Seattle, Washington-based e-commerce firm will however retain its intellectual property. In a statement, Amazon indicated that it will still optimistic about the growth potential in China and that the move to sell the physical infrastructure was to ensure compliance with Chinese law.
Regulators in China are tightening the rules that govern cloud services and foreign data. This has seen new surveillance measures implemented and cross-border data transfers coming under increasing scrutiny. Chinese laws that were passed five months ago require companies operating in the country to store their data locally.
The cloud business of Amazon in China was already facing tougher rules as a result of the tight internet controls that were in place. Three months ago Amazon’s Chinese partner Sinnet informed customers that it would be shutting down virtual private networks as well as other services running on its networks which aid users in circumventing China’s Great Firewall.
The move by Amazon will also cast a shadow on other foreign-based technology companies which have Chinese operations such as IBM Corp, Oracle Corp and Microsoft Corp and are currently localizing the data storage units they use in China. Firms such as Apple have already moved to transfer some of their data to Chinese ventures which are overseen by local officials. The Redmond, Washington-based Microsoft operates its public cloud venture in china in partnership with 21Vianet Group.
“We expect other foreign players, such as Oracle and IBM, will also ensure regulatory compliance as long as they want to provide public cloud services in China,” Charlie Dai, an analyst at Forrester Research based in Beijing, said.
China’s cloud computing sector has seen increased competition in recent years as more players enter the field. Alibaba Group Holding is one of the major players in this sector. Since 2016 the cloud computing unit of Alibaba has opened more than a dozen data centers located overseas. Per a report prepared by Synergy Research Group around 80% of all the revenues generated from cloud services in China this year went to Chinese firms though they account for about 50% of the data centers.