Amazon Spins off Cloud Business to Chinese Firm

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

In August 2016, Amazon signed a deal to let Chinese tech firm Sinnet operate services provided by Amazon Web Services (AWS) in China.

Sinnet said in a regulatory filing on Monday that the purchase, which is still pending, would help it "comply with China's laws to further improve the company's AWS cloud services" in terms of quality and security.

But Amazon said that it is only selling "certain physical assets" and still owns the intellectual property for AWS worldwide.

"AWS continues to own the intellectual property for AWS Services worldwide,” Amazon told media outlets Tuesday. “?We're excited about the significant business we have in China and its growth potential over the next number of years."

The deal could be linked to increasing regulatory scrutiny from the Chinese government who is trying to tighten their grip on the internet in the country. Sinnet asked its customers earlier this year to stop using virtual private networks, which are able to circumvent China's Great Firewall.

AWS has been a jewel in the crown for Amazon's earnings in recent times and a big reason why the company's shares are up over 50% year-to-date.

Amazon shares acquired 50 cents to $1,129.67 mid-morning Tuesday.