It seems counterintuitive, but the gene that causes hairlessness in the Chinese Crested is dominant to the gene of the coated Powderpuff. A mutation of the FOXI3 gene causes hairlessness in hairless breeds, and it’s dominantly inherited. It’s not possible to “breed out” the coated Powderpuff because all Chinese Cresteds carry that recessive gene.  As a rule, if a copy of a gene is mutated, a healthy copy takes its place, but with the hairless gene, it doesn’t. This means that dogs with one mutated and one normal gene are hairless, and dogs with two healthy genes are coated Powderpuffs. Puppies with two mutated genes don’t survive to birth because they die in a prenatal stage. This is why coated variants of hairless breeds haven’t been eliminated: All living hairless dogs must have one healthy gene copy to survive.

“Growing Up” by Barbara Keith
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