This article examines the capacity of China to adapt in the face of the political and social challenges brought about by economic reforms, and argues that the regime's resilience lies in the state's capacity to establish infrastructural power at the urban grass-roots level. The 1980s was an invaluable historical period, which witnessed the early stages of the economic reforms and the Chinese state experimenting with ways to adapt to the emerging challenges. As the danwei (work unit) system weakened, the state rebuilt the logistical infrastructure by means of handling burning issues, accumulating resources for expanding welfare coverage, facilitating residential-based grass-roots administrative networks, and consolidating its power through building institutional infrastructure for urban governance.