"In May, as AOL Time Warner Inc. prepared to unveil a joint venture it hoped would open the Chinese market for AOL's Internet services, executives circulated a list of sample media questions that might come up - including a particularly awkward one.

Question No. 19 asked: What would AOL do if the Chinese government demanded names, e-mails or other records relating to political dissidents?

The answer recommended in the memo was vague. 'It is our policy to abide by the laws of the countries in which we offer services,' it said. 'We will work closely with government officials, and our partner in China, to understand and comply with the regulations that govern online services in China.'

AOL executives would not comment on the memo, which one official said was only a draft. Moreover, AOL executives say, for now the question is purely hypothetical. AOL's deal with Chinese PC manufacturer Legend Holdings Ltd. initially applies to Hong Kong only. Until China joins the World Trade Orgamzation, changes its regulations and grants licenses to AOL's joint venture, the company's software and services will not be allowed to appear in China - and AOL will not have to confront the dissident question for real.

But human rights groups are trying to prod AOL - and other U.S. companies - to commit to uphold basic freedoms and fair labor practices when they do business in the People's Republic of China, especially because congressional approval of permanent normal trade relations has all but eliminated the threat of U.S. government sanctions on Beijing.

Many business executives and others who favor engagement with China argue that U.S. businesses, and particularly those related to the Internet, gradually can bring American values to China. Human rights advocates say that depends on how much backbone private companies will demonstrate.

In the case of AOL, that is unclear. Neither privacy nor free speech is protected in China, which could be embarrassing for a company that portrays its international business as more than a profit-making venture.

'For us,' the company says on its Web site, 'the measure of achievement goes beyond the bottom line. To succeed, we must provide the best quality products and services, act with integrity and contribute to the common good.'

'My personal feeling is, we obviously support privacy,' Michael Lynton, president of AOL International, said in an interview. 'We do with existing members about the world. But when you look at the way our service has been run around the world in various countries, those issues about privacy have to be looked at in a local context.'

Lynton cited Australian sensitivities about pornography and German laws about hate crimes as examples of national laws that sway AOL policies.

'We have to be respectful with local laws about that, and we have been in the past,' Lynton said, adding that when AOL negotiates with Chinese authorities, it will discuss privacy and free speech issues.

But human rights groups say the German and Australian situations are a far cry from betraying people who advocate democracy in China. 'There is a big difference between protecting children from pornography and protecting governments from dissident speech,' said Tom Malinowski of Human Rights Watch.

While acknowledging that 'it would be very hard for one company, even AOL Time Warner, to take up the cause of free speech all by itself,' Malinowski said, 'the turning over of information about dissident activity to the Chinese government ought to be anathema to any American company.'

He added that the Western business community 'as a whole should be getting together and saying that there are certain lines it can't cross. . . . If AOL Time Warner can't lead that effort, nobody will.'

In the United States, AOL gives the FBI and other authorities information about members, their screen names and some details about when they use the sprawling online service - but only after receiving a subpoena, court order or search warrant. It is unclear what legal formalities the company would insist on in China.

AOL's Lynton says that 'right now, when it comes to the Internet, the government in China seems to be tying to sort through its agenda. I wouldn't want to force the issue today.'

Because the Internet allows instantaneous communications across borders, it has often been portrayed as a tool of freedom and democracy. But a recent study of China and Cuba by two fellows at the Carnegie Endowment for International Peace concluded just the opposite. The report's authors, Shanthi Kalathil and Taylor C. Boas, wrote that 'far from hastening its own demise by allowing the Internet to penetrate its borders,' an authoritarian state can turn the technology to its advantage, using it to spy on its own people, uncover political opponents and spread propaganda.

Malinowski agrees. 'We're not against AOL being in China,' he said. 'But just being there is not enough. Some effort has to be made to actively defend free speech.'

Some members of the Bush administration also are paying attention. A State Department official aware of the AOL issue said, 'They are making the case that their presence over time advances freedom. To accept restrictions like that would stymie the current move toward freedom.'

The official added that Sectretary of State Colin L. Powell, a former member of the AOL board of directors and a substantial stockholder in the company has been receptive to suggestions that the administration encourage companies to act responsibly in China, just as U.S. companies operating in South Africa under apartheid were encouraged to adopt certain standards voluntarily.

In another possible precedent late last year, Harold Koh, the Clinton administration's assistant secretary of state for democracy, human rights and labor, obtained a voluntary agreement from some major oil compames to safeguard human rights in developing countries. Among the firms were BP Amoco, Chevron, Freeport McMoRan Copper & Gold, Conoco, Shell and Texaco.

The stakes in China are high, however, and it isn't clear whether companies jockeying for licenses and market share want to complicate their efforts.

AOL is looking overseas to maintain rapid growth as the U.S. market becomes saturated. AOL Chairman Stephen M. Case told shareholders early this year that he had set a goal of getting half of AOL Time Warner revenue from overseas by the end of the decade, up from one-fifth now. A joint venture with Legend offers a quick way into China, where the number of Internet users has gone from virtually none in 1995 to more than 22 million today and is projected to reach 60 million by 2005. In that exploding market, Legend sells more than one of every three computers, and installing AOL software on those machines would be a boon for the U.S. company.

They have terrific distribution, said Lynton, who called similar arrangements in other countries a 'great way' of distributing AOL products. 'They understand what we are tying to do and the importance of brands.'

But AOL has stumbled in China before. It made a Hong Kong franchise agreement with a firm called Chinadotcom Corp. in late 1999, flew Case to the launch and handed out free compact discs to woo consumers. But the venture proved a disappointment, and AOL severed its ties with Chinadotcom last month.

A China-based media executive with a close relationship to Time Warner said the new deal with Legend is 'based on a very, very vague business plan.' He said AOL wants to provide both Internet service and content in China, which requires a slew of approvals from Chinese ministries and Communist Party departments.

To sell content, for example, the company needs approval from China's propaganda czar, Ding Guanggen, the Internet bureau of the State Information Office and local authorities. In the past, Ding has led campaigns against 'spiritual pollution' from Western films and has vowed to restore 'patriotism, collectivism and socialism.'

Signs of official enthusiasm for the AOL-Legend venture have been sparse. AOL Time Warner chief executive Gerald M. Levin met with Chinese President Jiang Zemin in Hong Kong in May. An executive in the region said Levin unsuccessfully tried to include then-Legend executive Liu Chuanzhi in the meeting. On June 11, when Levin traveled to China to announce the Legend deal, he was able to arrange a meeting only with the head of the State Council's information office, Zhao Qizheng, and the minister of information industry, Wu Jiquan.

'They are trying to spin the perception that they have the backing of Zhongnanhai,' the executive said, referring to the Chinese leadership compound. 'But, in fact, it is not necessarily the case.'

AOL officials said the June trip was arranged on short notice and, because Levin had seen Jiang in May, he was not disappointed about being unable to meet with more senior Chinese leaders in June.

Lynton said the business hurdles ahead explain why AOL has not confronted the human rights issues that might come up. He said the Legend venture in Hong Kong is 'the very first step we're taking in our efforts to eventually launching the AOL service in China. We have yet to sit down with the various authorities in China and walk through all the issues. . . . We're considering some of them, but there has been nothing resolved.'" (Steven Mufson and John Pomfret, The Washington Post, August 29, 2001).