8 weeks is okay unless he is a very tiny Chi. Sounds like he is testing his dominance - you should definitely nip it in the bud while he's little. I've heard of many pups having issues like this that have been resolved successfully with the correct training. When he growls DO NOT stop what you're doing! He's looking for you to back off & if you do it will only empower him & let him know he will get what he wants if he growls. Witht he nipping - I'd do what a mom pup would do - gently put him on his side & hold him there until he is calm. I may even growl back at him at the same time!
I would not stop picking him up while he is asleep. Chi pups, or any pup for that matter will behave however you allow them to. YOU need to set the rules & let them know what is & what is not okay. If you don't continue to pick him up while he's sleeping - when he is older, if a child happens to go near him or if you happen to accidentally bump him or what not while he's asleep - he could very well turn around & bite you or the child. They need to be used to ANY sort of circumstance so if you teach them when they're young that anything could happen at any time (like being woken up) it won't be such a "shock" when they're older & they will not over react.
Pull on their ears & tail (gently of course), play with their feet, pull at their back skin on a regular basis (again, gently of course), brush their teeth, socialize them with many different people & places, etc. Get them used to anything they may encounter as an adult so they are used to it. It's all apart of having a balanced adult dog that is equipt to handle LIFE!