The difference between compounds and phrases has always been a problem in theories and applications of modern Chinese grammar and lexicology, about which there are two opposing views. The mainstream view is that there exists consistency or parallelism between compounds and phrases, namely, that the two are identical in terms of grammatical structure and grammatical meaning. The other view is that the former is incorrect or at least not completely correct. However, neither of these views has been sufficiently proved. The study finds that, first of all, there is an apparent contradiction in the so-called ″parallel theory″, according to which, the grammatical parallelism of compound words and phrases is emphasized theoretically, but when distinguishing them in practical terms, differences in phonetics, meaning and grammar are also acknowledged. The theory attaches importance to the grammatical differences. Secondly, we find that compounds and phrases differ in at least the following five aspects. The difference in nature and function: compounds， carrying the minimum concepts， performing the function of reference and naming. Phrases, by contrast, are the compounds of concepts and perform the function of description or predication. The difference in meaning transparency is significant: the meaning of compound words is integrated or abstract. With the bound morpheme increasing in modern compounds, the meaning is less transparent; on the contrary, the meaning of phrases is highly or even completely transparent. The difference lies in the grammatical meaning: grammatical meaning like a syntactic component relationship cannot be found between the compound components; however, specific grammatical meaning can be found between the phrase components. Correspondingly, in terms of the combination, a structural analogy combination that can be found in phrases cannot be found in compound words. The difference also lies in the relationship between the constituent attribute and the overall function: compounds must be composed of morphemes; phrases must be composed of words and the relations can be analyzed. In addition, there is no relevance between the constituent attribute of a compound word; while, the constituent attribute of a phrase is consistent with the overall construction. The difference also lies in the word order and its function: the word order of compounds has no grammatical value but it determines the word’s meaning; in contrast, the word order of phrases has a clear grammatical function. In addition, compound words allow the ″unreasonable″ combination of constituents, while phrases do not. In Conclusion, there is no such a thing as grammatical parallelism or consistency between Chinese compound words and phrases. Using a grammatical category to describe and explain the internal relationship of compound words is groundless and does not help to illustrate the mechanism behind the formation of compound words.