There’s a fine line everyone has to tow when doing public activities in China — that line between absolute freedom and the Chinese government. I touched on this a bit in my previous post on the One China Policy.

But what if your concessions result in jail time for a Chinese dissident?

That’s what’s at stake for Yahoo, as the company is being criticized by the US Congress for turning over documents that led to the arrest of a Chinese journalist.

Here, you’ve got an interesting case of business ethics:

The committee is investigating statements Mr. Callahan made at a Congressional hearing early last year. He said then that Yahoo had no information about the nature of the Chinese government’s investigation of Mr. Shi when the company turned over information about him in 2004.

Mr. Callahan has since acknowledged that Yahoo officials had received a subpoenalike document that referred to suspected “illegal provision of state secrets” — a common charge against political dissidents.

Though you won’t likely find much discussion online, this makes me wonder if Yahoo will quietly be shunned by the Chinese, in the fears that one questionable search string could mean unexpected prison time.

Meanwhile, there’s not much Yahoo could really do to manage the bad PR. I mean, you can’t just go back in China and just say “we promise not to hand over dissidents next time!” — you’ll be on some inner politburo black list faster than you can say Tiananmen Square.

What I found interesting was how Callahan said “that in going into future markets, like Vietnam, Yahoo would aim to find a way to avoid turning over to the government information on citizens’ online activities.” Umm, if I’m not mistaken, Vietnam is also communist and also run similarly to the Chinese government. I’d love to sit in on that meeting where they figure out how.