* SSEC flat, CSI300 -0.3%, HSI +0.4% * HK->Shanghai Connect daily quota used -2.9%, Shanghai->HK daily quota used 2.4% * FTSE China A50 -0.8% BEIJING, July 16 (Reuters) - China stocks dropped on Friday with consumer shares leading the loss, but are on track to post a weekly gain, boosted by the central bank’s surprise cut in cash that banks have to hold as reserves and hopes for further easing policies. ** At the midday break, the Shanghai Composite index was edged down 0.02% at 3,563.79 points, while the blue-chip CSI300 index was down 0.34%. ** The consumer staples sector was down 1.13%, and the healthcare sub-index was down 0.27%. ** For the week, CSI300 so far increased 1.27%, while the SSEC also added 1.13%. ** China’s central banks made a surprise cut in banks’ reserve requirement ratio (RRR) last Friday, releasing around 1 trillion yuan in long-term liquidity, lifting hopes for further policy supports throughout the week. ** Investors’ sentiment was also lifted by better-than-expected June activity data including retail and industrial output, driven by a rebounding developed market demand coupled with the sluggish recovery in Southeast Asian exporters. ** The brokerage recommended sectors with long-term growth potential, as well as investment themes including carbon neutralization and self-sufficiency in key technologies. ** “(But) as uncertainties about (China’s) monetary policy and sector regulation persist, (it is) likely putting pressure on stock valuations in the second half of the year,” said Zhu Chaoping, Global Market Strategist with J.P. Morgan Asset Management. ** Chinese H-shares listed in Hong Kong rose 0.19% to 10,194.06, while the Hang Seng Index was up 0.45% at 28,121.00. ** The smaller Shenzhen index was down 0.28%, the start-up board ChiNext Composite index was weaker by 1.12% and Shanghai’s tech-focused STAR50 index was down 0.89%. ** Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.27% while Japan’s Nikkei index was down 0.87%.