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The government has begun a review with an eye toward dropping preferential tariffs for imports from developing countries, a move that may push up prices of inexpensive Chinese imports, government sources said Wednesday.

China, the biggest beneficiary of the preferential tariffs, faces the review amid growing skepticism over whether it should be treated as a developing country in light of its rapid economic growth and strong international competitiveness, the sources said.

Under the system, designed to support the growth of developing countries by encouraging imports from them, lower tariff rates are applied to 1,182 products in 79 sectors and the total amount of reductions is fixed for each product. Fireworks, for instance, are usually subject to a 4.0 percent tariff but the rate is cut to zero for imports from developing countries.

While each developing country is eligible for up to 20 percent in tariff cuts allocated for each product, China has tapped the maximum rate in 46 sectors.

Imports under the preferred tariff system totaled ¥2.08 trillion in fiscal 2008, including ¥1.62 trillion, or 77.9 percent for Chinese imports. More than 10 percent of total imports from China were subject to lower duties in the year.

In reviewing the system, the Finance Ministry is looking to cut the maximum available tariff reduction rate to each developing country to 15 percent from the current 20 percent to allow more nations to benefit from the system, the sources said.

The government is expected to seek approval for changing the preferential tariffs from the Diet in its ordinary session that convenes in January.

Chinese imports under the system range widely from daily necessities to industrial products. As price-conscious consumers are increasing in Japan, importers of Chinese products will find it difficult to raise their prices when the tariff system is revised, analysts said.

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