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Amazon Is Expanding Overseas but Struggling in China

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Expansion in China

Through Amazon Web Services (or AWS), Amazon (AMZN) is a leader in the cloud computing business in the US and strives to expand its service overseas. In Asia-Pacific markets, AWS finds India and China to be promising. While Amazon is expanding its presence in India, the market in China is extremely crowded and is dominated by local rivals Alibaba (BABA) and JD.com (JD). Amazon still expects significant growth opportunities in China over the next few years and looks to penetrate Chinese markets.

According to Euromonitor, Alibaba and JD.com make up two-thirds of the Chinese online retail market. Meanwhile, Amazon made up just 1.3% of that market in 2016.

Restrictions in China

As per Gartner, Amazon controlled more than 40% of the global market for public cloud services in 2016. In China, cloud computing opportunities are attractive, but there are stiff regulations for foreign companies. US companies like Amazon, Apple (AAPL), and Microsoft (MSFT) have been facing hurdles in China due to increased scrutiny of cross-border data transfers.

As per guidelines in China, foreign firms cannot directly operate or sell their cloud services in China, be it storing data, building a facility, outsourcing, or transacting with customers. International companies must cooperate with local firms to serve as their cloud vendors in China. Also, many local competitors offer similar products at lower costs. For example, Apple faces stiff competition in China from Chinese manufacturers like Oppo, Vivo, Huawei, and Xiaomi.

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