i dont know about hhq16 on ships, but the land version, hq16, is refered to having composite guidance: inertial guidance coupled with intermittent SARH guidance up until SARH lock for terminal engagement. I never found any good sources saying it had telemetry datalink. Now, that seems very queer, as it shouldnt be too hard to implement it, but it could very well explain the relatively short ranges of hq16.
The way i see it, missile gets programmed before launch. It gets launched, it knows where to turn after launch. Its inertial guidance keeps it more or less in the direction it needs to go, inside the illuminator cone. The illuminator then paints the target, missile corrects itself if needed. Illuminator is then redirected, perhaps busy painting another target for another missile. First missile, again using its INS, flies towards target. Illuminator, if needed, again periodically paints the target, all up until the last few seconds of flight, when it stays on target so the missile could do its interception.
This sort of guidance isnt new, as far as i know, USN used intermittent guidance on (some?) SM-1 missiles.
With it, one gets ability to do concurrent engagements, or relatively decent antisaturation abilities, but the missile still has to fly the straight path and there are no parabollic trajectories and ranges suffer. That is of course not a problem for antimissile tasks nor engagement of low flying planes, but it does offer the enemy the chance to go high up and still stay relatively close to the ship.
Now, why on earth would one choose such a system in this day and age - i have no idea. Sure, it must be a bit cheaper. But can it really be that much cheaper to justify the loss of potential capability? Only reason I can think of so far is the doctrine. Perhaps PLAN absolutely does not intend to use 054a on their own. Maybe they intend to use them either as part of larger task force where other ships would carry hhq9, or they intend to use them relatively close to china's shores so the ships would enjoy PLAAF's protection or they intend to use them in low intensity missions, antipiracy missions etc.