BBC News technology reporter
Media watchdog Reporters Without Borders has accused Yahoo of being "a police informant for the Chinese regime", following allegations that information supplied by the company helped jail a journalist.
Yahoo should take ethical stance says watchdog
The allegations have once again raised questions about how companies should do business in China and how far they should collaborate with the Chinese authorities.
The Chinese economy is exploding and it is increasingly becoming an attractive new place for both on and offline firms to do business.
But for media and net based companies setting up a business in China also means adhering to local rules, including tight state controls of the press and restrictions governing what websites can say.
"Just like any other global company, Yahoo! must ensure that its local country sites operate within the laws, regulations and customs of the country in which they are based," Mary Osako, Yahoo spokesperson, told the BBC News website.
Reporters Without Borders accepts that Yahoo - and it is not currently known whether the firm volunteered or was forced to supply the e-mail details of Shi Tao - could have encountered legal problems with the Chinese authorities if it refused to comply.
But, Reporters Without Borders said, it is about time that the powerful net firms such as Yahoo and Microsoft that have set up shop in China stood up and were counted, putting an ethical position before their legal obligations.
Yahoo recently bought a stake in Chinese e-tailer Alibaba
"Rather than accept everything the Chinese authorities says, the big players could find a common position saying they will stick to the Universal Declaration of Human Rights and their own values," said Julien Pain, head of the Internet Freedom desk for Reporters Without Borders.
"It is a myth that China is so powerful that it is impossible to discuss anything with them," he added.
Companies operating in China are well aware of how the regime operates and how it censors internet content, said Mr Pain. Turning a blind eye should no longer be an option he thinks.
Human rights watchdog Privacy International has called for a worldwide consumer boycott of Yahoo.
"A boycott would send a clear message to Yahoo shareholders and other companies which cheerfully sacrifice human rights in return for a cut of the Chinese market," said Privacy International director Simon Davies.
In a world where companies are increasingly taking corporate responsibility seriously on both a local and global level, there are obvious issues in doing business with oppressive regimes, not least in terms of possible damage to reputations.
"One would hope that companies would put their reputations above any possible compromises with governments not playing by the standards that operate in the West," commented a spokesman for the Institute of Directors.
He acknowledged that dealing with regimes such as that operating in China could present problems. The IoD currently has no guidelines for its members about doing business in China but it is something it would look at in future, he said.
Yaman Akdeniz is the director of cyber-rights.net, a web-based e-mail service set up in the wake of tighter laws in the UK about the traceability of e-mail communications.
He advises activists using the web in oppressive regimes around the world to make sure they did not set up accounts with firms which have offices in the country in question.
"Providers with offices in China have to obey specific rules. We operate in the UK so I don't have to reply to any requests for information made by the Chinese government," he said.
While cyber-rights.net collects no information about its users it is not a completely untraceable way of sending communications.
If asked by the UK government to supply information in a fraud or terrorist investigation it is likely its parent company Hushmail would comply, even though it is based in Canada and not bound by UK law, said Mr Akdeniz.
"But if the request was for information about the account of a journalist it is likely it would be more reluctant to comply," he said.
Yahoo has recently made its commitment to the Chinese market clear, buying a $1bn stake in China's second largest e-tailer Alibaba.
Shi Tao, the Chinese journalist at the centre of the Yahoo controversy, was sentenced in April to 10 years in prison for sending, via e-mail, the text of an internal Communist Party message to foreign websites.
The message warned journalists about the dangers of social unrest as a result of the return of dissidents on the 15th anniversary of the Tiananmen Square massacre.
Microsoft is yet to respond to requests from the BBC News website for comment on the issues it faces in China.