Purpose: We examined whether the relations between home literacy environment (HLE), children's independent reading, and emergent literacy and reading skills are confounded by parents' reading skills (a genetic proxy). Method: One hundred eighty-nine Chinese children (M[subscript age] = 74.26 months, 40% female) were followed from kindergarten to Grade 2 and were assessed on emergent literacy skills (pinyin knowledge, phonological awareness, and vocabulary) and word reading in kindergarten and on reading comprehension in Grade 2. Their parents (both mothers and fathers) were also assessed on reading (word reading and reading comprehension) and completed questionnaires on HLE (code-related activities, meaning-related activities, and access to literacy resources) in kindergarten and their children's independent reading in Grade 2. Results: Results of structural equation modeling showed that access to literacy resources was associated with children's vocabulary, and code-related activities indirectly predicted reading comprehension through pinyin knowledge after controlling for parents' reading skills. Parents' reading skills indirectly predicted children's reading comprehension through children's independent reading. Conclusion: Code-related activities and access to literacy resources may have a true effect on children's reading development over and above the effect of parents' reading skills as a proxy for genetic transmission. The children of parents with better reading skills may engage in more independent reading, which may be related to their better reading comprehension.