SHANGHAI, Sept 7 (Reuters) - China shares fell on Thursday dragged lower by semiconductor stocks, while optimism over better-than-expected trade data capped losses.

** China's blue-chip CSI300 Index dropped 0.9% by the lunch break, while the Shanghai Composite Index lost 0.6%.

** Hong Kong benchmark Hang Seng Index was also down 1.0%.

** China's exports fell 8.8% in August, while imports contracted 7.3%, increasing pressure on the country's vast manufacturing sector as demand sags at home and abroad.

** The declines for both imports and exports, however, narrowed from July, a positive surprise for the market.

** While the better-than-expected data came as a relief, more stimulus measures are needed to drive economic growth and lift market confidence, UBS analysts wrote in a note.

** The U.S. Commerce Department should end all technology exports to Huawei and SMIC following the discovery of new chips in Huawei phones that may violate trade restrictions, the chair of the House of Representatives' committee on China said on Wednesday.

** Semiconductor stocks dropped 2.9% after a recent rally and were on track for the largest daily drop in over two months.

** China's top chipmaker Semiconductor Manufacturing International Corp (SMIC) declined 5.1%, after rising about 25% since August 21.

** Mainland property developers traded in Hong Kong declined 1.4%.

** Shares of Sunac China Holdings Ltd and Evergrande slipped after a wild rally in the past few sessions.

** Two of China's major state banks said they will start to lower the interest rates on existing mortgages for first-home loans. (Reporting by Shanghai Newsroom; Editing by Rashmi Aich)