Two picture-word interference experiments provide new evidence on the nature of phonological processing in speech production and visual word processing. In both experiments, responses were significantly faster either when distractor and target matched in tone category, but had different overt realisations (toneme condition) or when target and distractor matched in overt realisation, but mismatched in tone category (contour condition). Tone 3 sandhi is an allophone of Beijing Mandarin Tone 3 (T3). Its contour is similar to another tone, Tone 2. In Experiment 1, sandhi picture naming was faster with contour (Tone 2) and toneme (low Tone 3) distractors, compared to control distractors. This indicates both category and context-specific representations are activated in sandhi word production. In Experiment 2, both contour (Tone 2) and toneme (low Tone 3) picture naming was facilitated by visually presented sandhi distractors, compared to controls, evidence that category and context-specific instantiated representations are automatically activated during processing of visually presented words. Combined, the results point to multi-level processing of phonology, whether words are overtly produced or processed visually. Interestingly, there were differences in the time course of effects.