China stocks fell on Friday, and are on track to post a weekly loss, as data showed the country's annual factory gate inflation remained uncomfortably high and underlined growing strains on the economy.

The CSI300 index fell 1.1% to 5,034.76 points at the end of the morning session, while the Shanghai Composite Index dipped 0.7% to 3,501.16 points.

Shenzhen's start-up board ChiNext shed 1.2%, while Shanghai's tech-focused STAR50 index lost 2.5%. For the week, CSI300 declined 0.9%, while SSEC lost 0.5%.

China's factory gate inflation eased in June, but the annual rate stayed high. The persistently high inflationary pressures in the industrial sector prompted China's cabinet this week to flag potential policy easing measures, mainly to support smaller firms.

Investors should pay close attention to potential risks as the market now faces changes, including risks from some of China's real estate debts and the U.S. Fed's taper talk, Huaan Securities said in a note.

The brokerage recommended sectors with robust earnings growth in the first half, including semiconductor, new energy vehicles-related firms and sectors with low valuations.

In Hong Kong, the Hang Seng index added 0.7% at 27,330.71 points, while the Hong Kong China Enterprises Index gained 0.3% at 9,853.95.

The Hang Seng tech index slumped as much as 2.3% to a nine-month low before reversing course as investors hunted for bargains following a recent sharp correction.

China's securities regulator is setting up a team to review plans by Chinese companies for initial public offerings (IPOs) abroad, sources with knowledge of the matter said, including those using a corporate structure, which Beijing says has led to abuse.