The company's Chinese partner, Beijing Sinnet Technology co, has purchased the assets for $300 million but Amazon will retain the intellectual property.
To comply with Chinese legislation, however, Amazon sold certain physical infrastructure to its local partner.
"AWS did not sell its business in China and remains fully committed", the company said in an emailed statement.
Amazon said via a post on its website that its China public cloud services were managed exclusively by Sinnet.
"We're excited about the significant business we have in China and its growth potential".
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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. Sinnet will use the assets to operate Amazon cloud services within China. AWS runs a separate hardware venture in collaboration with the Ningxia provincial government in China's northwest, according to Reuters. Companies targeted by the regulations are required to carry out a security self-assessment or obtain approval from the relevant regulator before transferring the controlled data overseas.
The deal between Amazon and Sinnet is possibly connected with what is called the Great Firewall of China, the government's increasingly vice-like grip over Internet access in the country.
Amazon's decision casts a shadow over similar ventures in the country.
Whereas the European Union sees foreign cloud services as a source of revenue - fining them billions whenever they can think up some legal infraction they may have committed - China is obliging foreign cloud service providers to sell their assets to China-based companies which come under state control. Oracle, Microsoft and IBM also face hard new regulatory challenging for localizing their own data storage units.