This chapter takes up the cement industry to examine the relationships between the central government’s material distribution policy and the behavior of local enterprises, paying particular attention to the regional cement supply and demand relationship in Shanghai during the planned economy period. Shanghai, as the center of modern industry in China during the Republican period, had developed its cement industry to some extent before 1949 while simultaneously being a major consumer of cement. However, no large-scale cement factories were built in Shanghai after the establishment of the PRC since the central government adopted an inland-focused development strategy and did not mark Shanghai as a priority investment target. On the other hand, Shanghai experienced several surges in cement demand due to the central government’s industrial production promotion policy, while at the same time the cement distribution from the central government was insufficient, making it a region that was forced to deal with a “vertical shortage” of cement. This chapter examines the behavior of each entity involved in material distribution in Shanghai under the socialist system.