In what is a notoriously erratic price series subject to spikes, overnight offshore yuan deposit rates traded a lot higher for a third consecutive day. Probably linked to a new clampdown on the way smaller banks fund themselves (and who they lend to), the rate moved briefly above 5 per cent on Monday. Mid-sized and small banks represent half of interbank volume, where 97 per cent of transactions are concentrated in overnight- to one-week maturities, according to the China Foreign Exchange Trade System. This unstable funding stream from their larger peers is often invested in the shadow banking system, something the authorities are trying to discourage. Prohibitive interest rates will do the job just as well.