By Brenda Goh

SHANGHAI (Reuters) -China's Alibaba Group on Sunday announced that Daniel Zhang will step down from its cloud business, in a surprise move just two months after the company said he would leave his roles as group CEO and chairman to focus on the cloud unit.

Zhang had previously been concurrently serving in three roles, heading the group as well as the cloud intelligence unit. The unit is China's largest cloud provider and is set to be spun off from Alibaba as part of the group's restructuring.

The company announced his decision to depart the unit in an internal letter to staff seen by Reuters. Zhang had been scheduled to hand over the role of group CEO to Eddie Wu on Sunday and the letter said Wu will also take charge of the cloud business after Zhang's departure.

"The board of our company expresses its deepest appreciation to Mr Zhang for his contributions to Alibaba Group over the past 16 years," Alibaba said in a statement that simply announced that Wu would succeed Zhang in his roles at the cloud unit.

The company did not immediately respond to a request to make Zhang available for comment.

The cloud business is a major part of a restructuring the Chinese e-commerce giant announced in March that breaks the company up into six units, each with its own boards and CEOs.

Alibaba said in May it aimed to complete the public listing of its cloud unit within the next 12 months. On Sunday, the company said it would continue to execute the spin-off plan under a separate, to be appointed management team.

Analysts have estimated the cloud unit to be worth $41 billion to $60 billion, but have said the reams of data it oversees could put it in the crosshairs of regulators at home and abroad.

"Daniel has expressed his wish to transition away from his role as chairman and CEO of Cloud Intelligence Group," the company said in the letter that was signed by Joseph Tsai, an Alibaba co-founder who also took over the chairman role from Zhang as planned on Sunday.

"Following careful consideration, the Alibaba board respected and accepted Daniel's decision and appointed Eddie as acting chairman and CEO of Cloud Intelligence Group, effectively immediately."

Zhang will continue to contribute to Alibaba by "channeling his expertise differently," the letter added, saying that Alibaba will invest $1 billion in a technology fund that Zhang would establish. The company has also gave Zhang an "emeritus" title, a first in its history.

"The fund will support Alibaba's strategy of investing for future growth and continuing to develop our technology ecosystem."

Zhang took over as head of Alibaba's cloud unit in December after it suffered an outage that it described as its "longest major-scale failure" for over a decade.

A former accountant, Zhang joined Alibaba in 2007 and is known for being the architect behind the company's annual flagship "Singles Day" shopping festival. He was appointed CEO in 2015 and took on the chairmanship in 2019, succeeding both roles from Alibaba co-founder Jack Ma.

His final years as head of the group saw him manage the tech giant through a tumultuous two years that saw Alibaba heavily targeted by increased regulatory scrutiny.

(Reporting by Brenda Goh; Editing by Hugh Lawson and Sharon Singleton)