This dissertation investigates the relationship between word-internal structure of verbal compounds and the grammatical properties of the compounds, focusing on their transitivity. Adopting a functional point of view, it provides a syntactic as well as semantic account of the seemingly chaotic syntactic features that verbal Chinese compounds possess. By being able to predict the grammatical properties of newly created compounds, the findings of the present work can be used to help students of Chinese as a foreign language have a better grasp of the language, especially the compounding patterns. The results can also be applied in computational applications, such as natural language understanding and processing. In Natural Language Processing (NLP), information about the formation and syntactic behavior of compounds is necessary for a system to be able to understand and/or translate any sentence containing newly created compounds. The method of investigation is that of general functional linguistics guided by cognitive considerations, and the study is mainly data-driven. In this work, compoundhood in Chinese is considered to reside in a continuum, i.e. there is no clear-cut boundary between words and phrases. The properties, including transitivity where it is relevant, of the five types of Chinese verbal compounds---Verb-Resultative, Verb-Noun, Verb-Verb coordinate, Subject-Predicate, and Modifier-Verb---are explored and characterized, along with means of distinguishing the five types of compounds and the subtypes with similar formal appearances. The transitivity of Verb-Resultative compounds, a highly productive type, is explored in the most depth.