AWS Sells Part of Its China Infrastructure to Partner

To comply with China's increasingly stringent data security laws, Amazon Web Services (AWS) this week confirmed its intent to sell portions of its cloud infrastructure in that country to regional partner Beijing Sinnet Technology.

In a deal estimated to be worth over $301 million, Sinnet, a longtime AWS reseller partner, will acquire "certain physical infrastructure assets" from AWS, according to a Reuters report late Monday citing a Sinnet regulatory filing.

AWS characterized the move as an effort to comply with China's new cybersecurity laws, which significantly limit the ability of non-Chinese cloud vendors to provide their services to residents and businesses located inside the country.

The deal also represents a significant step in AWS' relationship with Sinnet. Since last year, Sinnet has essentially been the sole proprietor of AWS' Beijing region, the first and (so far) only AWS region in China. Sinnet was named AWS' primary service provider for Beijing in August 2016, with AWS taking on more of a back-end role.

"Beginning 1 August [2016], AWS Cloud services from the Beijing Region will be operated and provided by Sinnet, with AWS continuing to provide technology, guidance, and expertise to Sinnet," AWS said in a FAQ at the time. "This new operating model will apply to all existing customers and new customers running in the Beijing Region. Under the new operating model, Sinnet will enter into the customer agreement with customers, issue bills and fapiaos [transaction records], and receive payment for AWS services."

News of the sale of AWS assets to Sinnet quickly sparked other reports suggesting that AWS was exiting the Chinese cloud computing market altogether. AWS refuted those reports in a statement circulated to media, clarifying that it will retain ownership of the intellectual property of the assets in question, and that the sale was solely in response to changes in Chinese regulations:

No, AWS did not sell its business in China and remains fully committed to ensuring Chinese customers continue to receive AWS's industry leading cloud services. 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 and AWS seller-of-record for its AWS China (Beijing) Region. AWS continues to own the intellectual property for AWS Services worldwide. ‎We're excited about the significant business we have in China and its growth potential over the next number of years.

Currently, AWS' only operational region in China is in Beijing. However, the company has said that it plans to open a second region in China, located in Ningxia, sometime this year. AWS gave no indication how or whether the sale to Sinnet will affect this second region.

China began enforcing new cybersecurity legislation this past June that places strict rules on where corporations can physically store digital data on Chinese citizens and entities. The new laws also state that corporations must comply with Chinese authorities if they request access to that data. To ensure adherence, regulators will require businesses in "critical" industries to undergo IT system checks.

The new Chinese regulations come as other markets also explore implementing tighter restrictions on how data on their citizens is stored and accessed, particularly when the service providers collecting that data are located abroad. The European Union is expected to begin enforcing its own revamped cybersecurity laws, named the General Data Protection Regulation (GDPR), in May 2018, prompting cloud providers like AWS and Microsoft Azure to update their policies to meet the new requirements.

As regional cybersecurity laws become more stringent, industry watchers expect hyperscale cloud platforms like AWS and Azure to rapidly expand their datacenter footprints to more markets in a bid to comply with evolving data sovereignty requirements.

About the Author

Gladys Rama (@GladysRama3) is the editorial director of Converge360.


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