This chapter explores the process of the building of the socialist system in Shanghai by focusing on the People's Republic of China government’s policy toward private enterprises, especially that pertaining to the processing orders (加工订货) issued from government agencies and state-owned enterprises to private industrial enterprises. Shanghai was a major hub for private enterprise in the Republican period, and even after the occupation of Shanghai by the Chinese Communist Party in May 1949 there remained a significant number of private enterprises. Therefore, the new PRC government considered Shanghai the most important target area for the implementation of its policies in this field, and how to deal with the private enterprises in Shanghai represented a key issue in the formation of the Chinese socialist system.