Microsoft has its Azure cloud services operating in partnership with 21Vianet Group, which is based in China.
In 2013 Amazon's web services business signed agreements with provincial governments in China, and has previously worked with some of China's largest tech firms including Xiaomi, Qihoo and Kingsoft.
In a statement Amazon emphasised that it had not sold its business in China, saying that it "remains fully committed to ensuring Chinese customers continue to receive AWS's industry leading cloud services".
Amazon.com, Inc. (NASDAQ:AMZN) is selling some of its cloud business in China to its Chinese partner Beijing Sinnet Technology Co. for approximately 2 billion Yuan (U.S.$301.2 million).
"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.
Chinese regulators are tightening rules on foreign data and cloud services, including new surveillance measures and increased scrutiny of cross-border data transfers.
Laws that took effect during June require companies to store their data locally. Amazon said via a post on its website that its China public cloud services were managed exclusively by Sinnet. Sinnet asked its customers earlier this year to stop using virtual private networks (VPNs), which are able to circumvent China's Great Firewall.
The move places a big shadow over foreign ventures of a similar nature in China. Microsoft Corp, Oracle Corp and IBM Corp are also facing tough new regulatory challenges in localizing their data storage units. 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".
Amazon and other US companies, including Apple Inc., have faced pressure in China to comply with the government's desire to further tighten the screws on its already heavily policed internet.
In recent year, cloud services are becoming a crowded and major competitive domain in China.