The constituent parts of compound Chinese characters provide crucial semantic and phonetic information for deciphering the character as a whole. Exploring sub-character level processing may help improve our understanding of the mechanisms of Chinese vocabulary storage and retrieval, especially in foreign language learners. Yet, empirical research on adult Chinese-as-a-foreign-language (CFL) learners in this area remains limited. Do CFL learners use decomposition strategies in visual character recognition? If so, how does the combination of familiarity with an individual character and character frequency contribute to this process? How do CFL learners and Chinese native speakers differ? To explore these questions, a masked priming character decision task was used. Results show that CFL learners do not decompose familiar high-frequency characters nor unfamiliar low-frequency characters. However, there was evidence of decomposition for unfamiliar high-frequency characters and familiar low-frequency characters. In comparison, native speakers were found to process compound characters holistically.