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Microsoft Again Claims Most-Favored Cloud Status in China

Microsoft chief marketing officer Chris Capossela said on Tuesday that Microsoft Azure is the only U.S. public cloud that operates legally in China. But that claim raises eyebrows because Amazon Web Services, the public cloud market leader, also sells cloud services in China. As does IBM.

Capossela’s statement at a JP Morgan Chase (JPM) tech conference in Boston echoes similar comments by Microsoft CEO Satya Nadella over the past year. Pressed on the issue, Capossela said that Microsoft (MSFT) has a joint venture with a partner that the Chinese government recognizes.

“We are the only multinational company that does that,” he said.

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However, Amazon also partners with a local Internet provider, Beijing Sinnet, on its Chinese facilities. In an online post about that relationship, AWS said under this arrangement, Beijing Sinnet bills and manages customers on behalf of AWS. It is unclear why AWS or IBM (IBM), which works with 21Vianet, the same partner used by Microsoft in China, would be less legitimate or legal in that country.

An IBM spokeswoman said that company has been operating cloud services legally in China for two and a half years and is expanding those services via a new partnership with Wanda, a large Chinese conglomerate.

Amazon has not responded to a request for comment but Gartner (IT) distinguished analyst Lydia Leong, said any claim that AWS is not operating legally in China is “completely untrue.”

Just as Azure China is operated by 21Vianet, Amazon’s Beijing region is operated by Sinnet, Leong said via email. “Both meet the regulatory requirements for foreign cloud IaaS providers with services in China,” she noted. IaaS is a tech term for Infrastructure as a Service which is itself another name for public cloud, a model in which one company runs a vast network of data centers, packed with computing, storage, and networking gear.

Business customers that don’t want to run their own data centers—or build more of them—can rent use of that gear.

Related: Welcome to the Era of Data Center Consolidation

China, despite its tricky regulations and the government’s desire to keep data under its control, is an important market for U.S. companies. Forrester Research (FORR) projected that the public cloud market in China will grow from $2.2 billion in revenue in 2016 to $3.8 billion in 2020.

Related: Alibaba Ponies up $1 Billion to Build its Cloud Business

In China, AWS, IBM (IBM), and Microsoft challenge local public clouds like Aliyun, the public cloud backed by Chinese retail giant Alibaba (BABA). Internet provider Tencent also fields a cloud as does Internet search giant Baidu.

Related: China’s Huawei take on Alibaba and Amazon in Cloud Services

Google, generally considered the third largest public cloud provider, has not been a factor in China since shutting down its search engine operations there seven years ago. Google’s nearest cloud facilities are in Taiwan and Tokyo, neither of which would pass muster for use by Chinese companies worried about legal restrictions.

Microsoft, Capossela said, sees a big opportunity in China for multinational corporations from the U.S. and elsewhere that want to sell into that market.

China, is not the only government with strict requirements about how data is stored and handled. Germany, for example, mandates that citizens’ data be maintained inside the country. Regulations such as these are feeding the land-grab among cloud providers to put data centers in all relevant countries. That competitive fervor is also fueling claims and counter claims.