Economists have urged Beijing to ease its monetary policy to combat mounting global deflationary pressure since September 11. 'Our country should accordingly adjust the monetary policy to make way for the gradual transition from a stable to an appropriately active monetary policy,' the China Securities newspaper cited economists as saying at a weekend seminar. 'Measured relaxation of the monetary policy is [also] needed to stabilise the yuan to the US dollar exchange rate.' Economists were apparently responding to recent promises by senior mainland officials to maintain the 'stable monetary policy' that the People's Bank of China (PBOC) has been pursuing in recent years. Standard Chartered Bank senior economist Liao Qun said China's monetary policy was not too tight, but structural problems within the banking sector had made monetary policies ineffective. Analysts have described the PBOC as 'behind the curve' as central banks around the world turned to aggressive monetary intervention. China's closed economy has been blamed. Successive cuts had slashed key United States interest rates to their lowest level in more than 40 years. However, the PBOC left the benchmark one-year interest rate on yuan deposits at 2.25 per cent, a notch higher than the one-year US deposit rate of 2 per cent, putting pressure on the exchange rate. China would need to ease its monetary policy to accompany proactive fiscal measures, which usually have a longer time lag, of at least six months, said Fred Hu Zuliu, international economist at Goldman Sachs. He challenged the view that China could ill afford further interest rates cuts. Real interest rates of 3 per cent to 4 per cent were on the high end, leaving room for a 0.25 to 0.5 percentage point rate cut in the next three to six months, he said. Salomon Smith Barney economist Huang Yiping argued for a 0.5 to one percentage point cut in yuan interest rates or an expansion of broad money-supply. 'The rate cuts will not have a significant impact on the yuan-US dollar exchange rate because of relative weakening of the dollar,' he said. Caution by banks, as a result of reforms to reduce their non-performing assets, has thwarted Beijing's attempt to stimulate the economy by increasing lending to consumers and companies.