One hundred twenty-one third-grade Chinese children were assessed with a new morphological awareness task involving open-ended lexical compounding, in addition to completing other measures. With children's age, nonverbal intelligence, phonological awareness, and previously established measures of morphological awareness statistically controlled, this compounding production task significantly explained unique variance in both Chinese character reading and vocabulary knowledge. Within this new task, subordinate and coordinative structures were significantly easier to compound than were subject-predicate and verb-object structures. Moreover, novel compounds that made use of verb morphemes were more difficult to manipulate than were those that did not contain verbs. This newly developed task of compounding production may be optimal for tapping older children's morphological awareness in the form of lexical compounding, in both Chinese and possibly other languages. In addition, these results demonstrate that linguistic manipulations within tasks of morphological awareness can influence their difficulty levels. (Contains 7 tables and 1 footnote.)