* SSEC +0.2 pct, CSI300 +0.4 pct, HSI +0.2 pct
* Chinese business leaders overall hold a positive outlook - UBS
* Property shares fall after China c.bank supports rate hike moves
SHANGHAI, Sept 20 (Reuters) - China stocks edged higher on Wednesday, with sentiment propped up by signs of optimism among business leaders and expectations the government won't tolerate sharp volatility in the country's financial markets ahead of next month's Party Congress.
Hong Kong shares hovered around 28-month highs as Wall Street again rose to record highs, while caution prevailed before the U.S. Federal Reserve monetary policy announcement later in the day.
China's CSI300 index rose 0.4 percent, to 3,846.19 points at the end of the morning session, while the Shanghai Composite Index gained 0.2 percent, to 3,364.34 points.
Both indexes have been trading narrowly over the past three weeks.
Chinese President Xi Jinping has told security officials ahead of next month's key Congress of the ruling Communist Party that stability is an absolute principle that needs to be dealt with using "strong hands".
Xi's remarks strengthened views the government would also help maintain stability in the stock market as a share price slump risks a breakdown in social stability.
Beijing typically intervenes via state-backed investment funds and window guidance to brokerages and fund houses.
Meanwhile, UBS Securities published a survey suggesting Chinese business leaders overall hold a positive outlook for the next six months, with the majority of firms planning to increase capital expenditure over the next year.
Referring to the survey, which was based on interviews with senior executives at 500 Chinese companies, UBS strategist Gao Ting wrote:
"We believe higher optimism expressed by large firms is in part due to ongoing capacity cuts and production curbs as well as stronger environmental protection, which tends to benefit large companies in the impacted industries."
He added this is "a positive environment for banks, consumer, and large firms."
Resources shares posted solid gains on Wednesday, as commodity prices in Shanghai rose.
Consumer stocks, especially food and beverage shares were strong, as investors bet they would benefit from the week-long National Day holiday that starts Oct. 1.
But real estate shares dipped, amid signs Beijing is stepping up curbs on home price rises. China's central bank said late on Tuesday it supports a move by some banks to increase lending rates on mortgage loans in the Beijing market.
In Hong Kong, stocks were subdued.
The Hang Seng index added 0.2 percent, to 28,114.46 points, while the Hong Kong China Enterprises Index gained 0.3 percent, to 11,160.92.
(Reporting by Samuel Shen and John Ruwitch; Editing by Jacqueline Wong)