As is widely known, Japanese and Chinese not only share the common logographic orthography called “kanji” or “hanzi” respectively, but also share a number of kanji compounds as cognates, many of which share the same or similar meaning. The major objective of this research is to investigate the roles of transfer and the difficulty in Chinese background learners’use and acquisition of Japanese kanji compounds and kanji words. In particular, under what condition and how do CBLs transfer Chinese words into Japanese counterparts is investigated. The findings indicate that the transferability of Chinese words into their Japanese counterparts is constrained by multiple factors. Further, both positive and negative transfer influence Chinese background learners’ production, comprehension, and interlanguage construction of Japanese vocabulary in a complex manner.