The purpose of thìs paper is to demonstrate how productìon networks achieve lexible production both by coordination among firms and by constant adjustment of the number of firms and theìr division of labor. A case study of a cooperative (xieli) firm provides an analysis of the dynamics of production networks and explains the actions of various firms in terms of their position in a network. In a detailed analysis of a crisis situation and its quick resolution, the mobilization of firms to cope with the crisis shows the strength of a production network. We also point out that the cooperative firm is not as fragile as its position in the network structure may indicate, due to its survival strategy. Even in a crisis situation, the subordinated firm can use its network resources to recover quickly, and benefits from the experience by restructuring to meet future crises.