Does Xcode 8 support ios 7 ?

It seems to be; you can enter 7.0 into the "Deployment target" edit field. Any OS prior to 8 just insn't listed amongst the canned choices.

I can confirm that manually entering "7.0" as the deployment target works. After building from Xcode 8 GM, my app was approved and users with iOS 7 have installed it.

Well, my project's target is iOS 7, but when I try to run it on iPhone 4, which runing iOS 7, xcode says it doesn't support iOS 7.

To build and deploy from Xcode 8.X to iOS 7.0/7.1 download Xcode 7, install it separately then do the following

Copy these folders into your Xcode 8 app in the same location:

/Applications/Xcode7.app/Contents/Developer/Platforms/iPhoneOS.platform/DeviceSupport/7.0

/Applications/Xcode7.app/Contents/Developer/Platforms/iPhoneOS.platform/DeviceSupport/7.1

You can use whatever process you like for your app(s), but recommending unauthorized mods to the tools in public is reckless, I think.