"Chinese law forbids non-Chinese companies from owning or operating certain technology for the provision of cloud services", the US firm said.
Whereas AWS is the public cloud leader globally, it has struggled to crack a Chinese market that has traditionally been served by its own tech firms.
Beijing Sinnet Technology, Amazon's China partner, said in a filing late on Monday that it would buy the US firm's Amazon Web Services (AWS) public cloud computing unit in China for up to 2 billion yuan ($301.2 million).
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"In order to comply with Chinese law, AWS sold certain physical infrastructure assets to Sinnet", an AWS spokesman said on Tuesday, adding AWS would still own the intellectual property for its services worldwide.
Regulators in China have tightened rules on cloud services and foreign data, implementing new measures of surveillance and increasing the scrutiny of data transfer that cross borders.
One analyst based in Beijing said that the move by Amazon was mostly due to regulatory compliance.
It follows a prior arrangement with Sinnet, struck in 2016, which allowed the Chinese firm to operate Amazon Web Services (AWS) products in China. AWS runs a separate hardware venture in collaboration with the Ningxia provincial government in China's northwest, according to Reuters. Sinnet asked its customers earlier this year to stop using virtual private networks (VPNs), which are able to circumvent China's Great Firewall.
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Modi says relations between the USA and India are "growing very rapidly" and "getting deeper and more comprehensive". Secretary of State Rex Tillerson would attend the plenary session in his place, a senior White House official said.
The move casts a shadow over similar foreign ventures in the country.
Other tech giants from the USA faced hard situations in China. Sinnet said in the filing that the deal will help the service "comply with local laws and regulations and further improve service quality and security". In July, Apple dismissed VPN services from its app store in China.
In recent year, cloud services are becoming a crowded and major competitive domain in China.
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