The Story:

Beijing Sinnet Technology said Tuesday it would buy parts of Amazon’s cloud business in China (AWS China) for up to 2 billion Chinese yuan ($301 million), but the U.S. e-commerce giant said it was not exiting the world’s second-largest economy.

What did Amazon have to say?

Amazon Web Services confirmed in a statement reported by WSJ that this move was intended to meet compliance requirements in China.

”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.”

Important Because:

China is still considered extremely inhospitable territory for all foreign firms operating on their soil.

The deal between Amazon and Sinnet is possibly connected with what is called the Great Firewall of China, the government’s increasingly vice-like grip over Internet access in the country.

Earlier this year Sinnet asked its customers to stop using VPNs, or virtual private networks, which effectively aim to skirt around the Great Firewall.

Apple is also one of the companies that recently moved into compliance, removing all VPNs from its App Store in China as of July this year.

Facebook has been unsuccessfully trying for a long time to get permission to operate in the PRC, but the Great Firewall remains its worst nightmare.

Google shut down its search engine in China in 2010, after discovering a cyberattack targeting a group of companies including itself.

All these tech giants face a tight regulatory environment in China, which could be the primary reason that AWS China is quickly toeing the line before any unpleasantness occurs.

 

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