Connecting the Urban and the Rural: Shanghai’s SOEs and TVEs

At the end of the 1990s, I visited an old central Shanghai meters and instruments factory with more than eight hundred employees. This state-owned enterprise (SOE), a preserved relic, offered a rare glimpse into the not so distant past. An industry insider who I had met serendipitously on the subway told me, “It still does all of its own manufacturing. They manufacture the entire thing. They don’t subcontract anything at all. They have a huge workshop with all the different machinery necessary to make the entire instruments. It’s very wasteful. For example, the plastic injection machines are sitting idle every time I go there, because they are only needed for small batches compared to their overall production” (I1). He introduced me to the 1994–99 director of the factory, who explained that “we do contract out the production of components … not exactly contract out—we send them down to lower factories in our system.” He had not started to subcontract to township- and village-owned enterprises (TVEs) until 1997, because “the workers really have their own opinions about things. They think, if we can do it ourselves, why let go of it? This kind of thinking is limited by their interests—if employment or wages are involved in any changes, they get upset.” He continued, “but now, subcontracting is in the overall interests of the factory.