China stocks were roughly flat on Friday as disappointing inflation data added to economic concerns, even as Hong Kong shares followed Asian markets higher.

** Both the blue-chip CSI300 Index and the Shanghai Composite Index were little changed by the lunch break.

** But Hong Kong's Hang Seng Index gained 0.3%, as Asia-Pacific equities rose to their highest level since mid-February following an overnight Wall Street rally.

** Data released on Friday showed that China's factory gate prices fell at the fastest pace in seven years in May and quicker than forecasts, as faltering demand weighed on a slowing manufacturing sector and cast a cloud over the fragile economic recovery. Meanwhile, consumer prices rose less than expected.

** "Investor concerns over a macro recovery slowdown are still mounting," Morgan Stanley said in a note to clients, explaining why sentiment in China's A-share market dipped this week amid light trading volume.

** However, the Wall Street bank pointed to the reported upcoming China visit by U.S. Secretary of State Antony Blinken as possible signs of a thaw in Sino-U.S. relationship. Morgan Stanley said it's also closely watching more easing policies that may come around late June or early July. ** "With the earnings stabilization outlook and the geopolitical development, we do not believe that it makes sense to turn even more bearish on China now," the bank said.

** But for the short term, portfolio inflows into China stocks could be curbed as "China's growth recovery has been weaker than expected so far," said Tao Wang, Chief China Economist, at UBS Investment Bank.

** China's banking shares fell amid rising expectations of an imminent cut in lending rates.

** However, Shanghai's tech-heavy STAR market rose, after China's securities regulators vowed to support technology self-independence with fresh capital market policies.

** Shares of Hangzhou Hikvision Digital Technology Co Ltd slumped as much as 9.1% to a six-month low, after news that Britain would remove Chinese-made surveillance equipment from sensitive government sites. (Reporting by Shanghai Newsroom)