Updated with Amazon comment:

Bowing to Chinese law, Amazon.com Inc. said late Monday it has sold some physical infrastructure for its cloud computing operation in China but plans to keep providing cloud services in the country for years to come.

Earlier reports from the Wall Street Journal and Reuters said the public cloud giant had decided to sell its Amazon Web Services China business to a local company and Amazon partner called Beijing Sinnet Technology Co. The reports were based on a statement by the partner saying it would buy AWS China for 2 billion yuan ($300 million), and a Google-translated version of the company’s statement said it “announced the purchase of assets of the Company,” adding that the agreement was signed Nov. 10.

But despite initial appearances, an Amazon spokesperson insisted that “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.”

The spokesperson explained in a statement that “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,” the spokesperson said, adding, “‎We’re excited about the significant business we have in China and its growth potential over the next number of years.”

In January, China’s Ministry of Industry and Information Technology issued new rules requiring foreign companies with cloud ventures to get new operating licenses by year-end. Analysts from Citic Securities said in a note to clients Tuesday that the new deal between Amazon and Sinnet could clear the way for AWS to get licenses, the Journal reported.

AWS and Beijing Sinnet are not new to each other. The two companies have been partners since 2016, when Amazon said it had chosen the Chinese firm to operate and provide AWS Cloud services in the Beijing Region. Amazon did so to comply with local laws that state foreign firms can only provide cloud computing services through a local subsidiary. Amazon’s biggest rival Microsoft Corp. has followed a similar path, teaming up with Huawei Technologies Co. Ltd. to deliver its Azure cloud services to Chinese customers.

In addition to these rules, U.S. tech companies have also been placed under increased pressure in China to comply with the government’s strict internet regulations. Privately, many tech companies have chafed under the rules, saying they make it practically impossible to do business in the country. One industry official who declined to be identified by name told SiliconANGLE in July that prospects for change are limited. “China is moving to implement what they call internet sovereignty,” he said.

Beijing Sinnet was apparently involved in these efforts too, as it reportedly emailed Amazon’s Chinese customers earlier this year asking them to remove virtual private networks and other tools that can circumvent the country’s heavily policed internet. At the time, Beijing Sinnet said it was responding to a request from China’s public security and industry and information technology ministries to enforce the rules.

Partly as a result, China’s public cloud market is currently dominated by local players such as Alibaba Group Holding Ltd.’s cloud computing arm Alibaba Cloud, Baidu Inc. and Tencent Holdings Ltd., while U.S. firms have struggled to capture market share.

Some trade groups in the U.S. say that not only has China been recalcitrant on allowing cloud computing and other tech firms access to Chinese markets anything like the access the U.S. allows Chinese companies, but the Trump administration has been slow to take any action.

“It’s not a negotiation, or at least it shouldn’t be,” Robert Atkinson, president of the Information Technology & Innovation Foundation, told SiliconANGLE in July. “The Chinese government is blatantly flaunting the rules of trade, including but not limited to their completely unreasonable rules on cloud computing.”

Amazon Web Services has operated in China for years. A late 2013 press release announcing the planned opening of a China region boasted of thousands of Chinese customers, including Xiaomi, Qihoo 360 and PapayaMobile, already using AWS in regions outside China. Yuan Jiajun, executive vice chairman of the Government of Ningxia Hui Nationality Autonomous Region, praised AWS’s “highly reliable and secure cloud services” to millions of Chinese customers. “The local presence of AWS will help to accelerate the pace-of-innovation of Chinese businesses and further bolster China’s economy,” he said.

With reporting from Robert Hof and Duncan Riley

Image: Tomas Cloer/Flickr