Abstract: The Chinese economic reform has brought a complex economic and social structure with the coexistence of market competition and bureaucratic monopoly, which gives rise to all kinds of "gray" or even "black" markets and industrial chains that are outside the legal boundaries. This paper is an investigation of the survival crisis of workers in state-owned enterprises under the monopoly economic system through the case of "illegally working" assembly fitters in a tobacco equipment factory. The "Scott-Popkin" perspective of economic rationality and moral survival is applied as theoretical framework in this study. The study finds that the combination of market competition and bureaucratic control allows economic monopoly such as the tobacco industry that, in turn, breeds an underground industrial chain. The monopolistic and underground industries constitute unequal competition in production and redistribution, leading to monopolistic entities using institutional resources and public powers to prohibit underground entities. In response, underground entities work on small scales and short-term and flexible production process to improve their "exit" ability. The codependence as well as competitiveness between the two economies lead to inevitable business crisis at the end of production cycles once the SOEs lose monopoly protection, and skill mismatch crisis for workers. State employed workers who are unwilling to seek work in job market often take risks to "work illegally" with underground entities for higher returns, and in so doing help resolve the skill matching problem. This behavior can be rationalized as moral survival and market necessity. However, in essence, the phenomenon is the continuity of the elimination process of outdated technology and production organization, and a gain-loss struggle between the interests of the state, enterprises and workers. It lacks either the logic purpose of economic rationality or the legitimate basis of moral survival. The economic rationality and moral existence of Scott-Popkin's perspective constitute a dilemma of antinomy. The case examined here shows that under a monopoly system, the choice made by the SOEs workers is not just from their own initiatives but also is forced by the external institutional structure. How to have economic rationality coexist with moral existence, to make a "win-win" outcome between the state, enterprises and workers, and to realize social co-governance, it will not only be a test of the survival wisdom of the workers but a priority agenda of government policy makers and administrators.

Key words: monopoly economy, underground economy, "illegally work", "Scott-Popkin" perspective, tobacco industry