A spokesperson for AWS said Tuesday that to comply with the laws in China, AWS sold some physical infrastructure assets to its partner Sinnet, adding that AWS would remain the owner of intellectual property for its worldwide services.
Amazon launched its web services business - better known as AWS - in China in 2014.
According to press reports, Amazon is only selling "certain physical assets" and the deal will allow Sinnet to better comply with Chinese laws.
One analyst based in Beijing said that the move by Amazon was mostly due to regulatory compliance. Microsoft has its Azure cloud services operating in partnership with 21Vianet Group, which is based in China.
AWS has another hardware venture with the provincial government in Ningxia located in the northwest region of China. In China, regulations require Amazon to operate via a local partner before offering the services to customers.
Amazon controlled more than 40 percent of the global market for public cloud services in 2016, well ahead of Microsoft Corp. and Alibaba, Gartner estimates.
Amazon's decision casts a shadow over similar ventures in the country.
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. Foreign firms have repeatedly complained about the biased regulations in China that favor the local companies. Besides cloud services, Beijing is also tightening its grip on online expression, cracking down on virtual private networks often used to dodge internet restrictions and strictly regulating writings on platforms such as blogs.
On Monday, Amazon shares closed up 0.34% at $1,129.17.