The strict rules in China is clearly affecting American businesses. The latest casualty in this list is Amazon. In announced that it will be selling computing equipment used for its cloud services to its local partner, Beijin Sinnet Technology Company. This move is aimed to comply with the new Chinese regulations on how foreign companies can operate on Chinese soil.
Amazon sold this crucial aspect of its business to its Chinese partner for $301 million. However, the company reiterated that it would continue to hold the intellectual property rights for its hardware worldwide.
The latest Chinese regulations that came into effect in June requires companies to store data locally. This law was aimed to tighten the scrutiny of cross-border transactions and to implement stricter surveillance measures.
Already, Amazon had to contend with a lot of regulations due to China’s tight Internet controls. In August, Beijing Sinnet was forced to shut down its VPN and other services that could circumvent the Great Firewall of China. So, this made it more difficult for Chinese to access any content that was not approved by the government.
Though there were a few critics who thought this move by Amazon could trigger problems later on for the company, it was nevertheless necessary for Amazon to continue its operations in China and to even expand to other business areas in the market.
Interestingly, AWS has a hardware partnership with Ningxia province in northwest China. But, the company clarified that this venture will not be affected in any way as all public cloud services of Amazon in China is exclusively managed by Sinnet.
Though Amazon paints a perfect picture, it’s not so perfect really as it casts a shadow over the way other companies such as Microsoft and IBM operate in China. It remains to be seen how the other major players will react to this sale and how they will change their respective business to comply with Chinese laws.
The biggest advantage from these moves goes undoubtedly to local Chinese firms, which is also the aim of the government. Currently, about 80 percent of all cloud services revenue and more than half of all data centers are owned by Chinese companies. These numbers could go up, thereby signaling bonhomie for Chinese tech companies.
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