This paper reports the findings of a psycholinguistic study of the development of phonological awareness (PA) in Chinese children acquiring their first language and learning a foreign language at the same time. The language situation of these children in relation to PA is of particular interest because Chinese and English have not only different phonological systems, but also different writing systems. Eighty-two children in Taiwan aged 10-11 were tested on Chinese and English PA processing tasks. These tests included six tasks, such as syllable awareness, initial phoneme oddity, final phoneme oddity, medial phoneme oddity, final phoneme deletion and initial phoneme deletion. Pearson correlation coefficients and stepwise regressions were used to determine the PA in both languages. The findings indicate that (1) strong positive associations exist between English/Chinese PA and English/Chinese abilities for all subjects; (2) skills in phoneme segmentation and phoneme deletion acquired in Chinese are transferable to English for young Chinese EFL beginning learners; and (3) skills in first phoneme oddity and initial phoneme deletion are good predictors for success in learning an alphabetic language such as English.