The HSBC China Manufacturing PMI fell to a 12-month low of 49.2 in the flash reading for April, down from 49.6 in March. Domestic demand continued to decelerate, which led to slower output growth and less re-stocking. Despite the recent property easing measures and strong infrastructure investment, the sequential slowdown continued. Today's data highlights the challenges of generating a meaningful recovery in the coming quarters. After the poor Q1 activity data release, the economy already appears to be in deflation on some measures which warrants much more forceful policy easing measures. We forecast a 25bps cut to the policy rate in the coming weeks.