“…As a result, many of these firms, which found their own bureaucratic patrons, are not motivated to upgrade and raise their productivity, and are instead competing in a "race to the bottom" for predatory pricing. Moreover, confronting the reality that China has less secured property rights protection, as do other authoritarian countries, private entrepreneurs have a strong incentive to form collusive relationships with local bureaucrats to protect their wealth against state predation 39 Consequently, since the 1990s the major source of economic growth in China has shifted from rural entrepreneurship to state capitalism, even though there has been continuous growth of private capitalism in urban areas 40 Critics of the above argument focusing on the CCP's cooptation strategy point out that the number of private firms increased rapidly in the 1990s 41 However, as Yasheng Huang argues, although private entrepreneurs in the 1980s contributed significantly to rapid development, those since the 1990s have not 42 While most studies only include the firms that are formally registered as "privately managed enterprises" (siying qiye) in the private entrepreneurs, Huang also includes small-scale unregistered individual household enterprises (getihu qiye) in that category. These small-scale household enterprises usually try to avoid interactions with the state 43 In the meantime, many of the registered private entrepreneurs were successful in business by using their political ties that had been established from their previous professional experience as an SOE manager or as a government official 44 Not surprisingly, those nominally private entrepreneurs who have strong ties to the CCP do not demand democratization but support the current oneparty rule 45 Because the CCP successfully created the collusive and corrupt vested interests of the nominally private entrepreneurs, nominal privatization of the SOEs in the 1990s formed the basis of the CCP's cooptation strategy under state capitalism.…”