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Amazon Sells China Cloud Business as Online Controls Tighten

Patrick Frater

Amazon has agreed to sell its cloud computing business in China for about $300 million. The move is a response to the Chinese government’s increasing control of the Internet and web services.

The e-commerce giant said Tuesday that it sold the infrastructure behind its Chinese public cloud business to its existing partner, Sinnet, in a deal valued at up to $300 million. Amazon Web Services will continue to own the company’s intellectual property.

Earlier this year, China introduced new laws that require all companies operating in China to store data locally. The measures, which took effect from June, also halt use of the VPNs that consumers and businesses use to access web services and websites that are not available or blocked in China.

While Chinese President Xi Jinping this week proclaimed the advantages of global trade and allowed increased foreign ownership in the financial services industry, the country is moving in the opposite direction on the Internet. Xi is intent on asserting Internet sovereignty within national borders, and regards controls as a matter of national security.

International companies are having to choose between the kind of compliance that requires them to give backdoor access to the Chinese authorities or to exit the country. Google previously quit the Chinese search-engine business in 2010 when it became clear that the government expected the company to conduct censorship on its behalf. But others are expected to fall into line. Apple, Microsoft, Oracle and IBM all have cloud computing businesses in China.

Though the company remains outside, Facebook chief Mark Zuckerberg last month made his annual visit to China. Recent media reports suggest that Facebook is making renewed attempts to open for business in the Middle Kingdom, though in the last months its instant messaging service, WhatsApp, has found itself newly banned. Last year, the New York Times reported that Facebook was designing a censorship tool that might comply with Chinese requirements. It is not clear whether that remains in development.

Amazon’s move highlights the difficulties facing companies, such as Netflix, that would like access to China but remain blocked. Their absence means that China’s tech giants have the field largely to themselves and are growing bigger. But these companies pay a significant price in terms of independence.

Local Chinese tech giants Tencent and Weibo were recently fined for not sufficiently censoring user comments on their platforms. The government now also says that it wants to have equity stakes in tech firms and to have boardroom representation.

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