Yes, traditionally Chinese martial arts do not have belt rankings. They seem to use a seniority system, where basically the person that has been there longer than you is senior to you. The 'rankings' use familial terms, for example:
si gung: your teacher's teacher (your 'grandfather')
si hing: male who has been in class longer than you (your 'older brother')
si je: female who has been in class longer than you (your 'older sister')
si bak: your teachers si hing (your 'uncle')
and so on.
Traditionally, you show respect and defer to you seniors. This is what got Bruce Lee in trouble in Yip Man's Wing Chun class. He was constantly challenging his seniors (big no-no). The problem was, the few who did accept his challenges usually got beaten. This prompted them to get Lee kicked out of Yip Man's school. Skill doesn't really have much impact in this type of structure, though it is assumed that your si hings and sifu will be more skilled than yourself.
:soapbox:
As for the terms 'master' and 'grandmaster'...I believe that these are never something one calls oneself. I am automatically wary of anyone advertising themself as a 'master' or 'grandmaster'. Worse are the people who introduce themselves as 'Master Schmuckety Schmuck' or 'Grandmaster Iwantyourmoney'. Those terms are something bestowed upon you by others. They are not titles, like Doctor, Captain, Professor, etc.
If I ever called myself 'master' or 'grandmaster', I hope my instructor hunts me down and beats the holy crap out of me.
However, if one feels the title is deserved, one can always refer to someone else as 'master' or 'grandmaster'. Again, this is an acceptable use of the terms since one is calling someone else that term, rather then using it for oneself.
I should point out that, generally speaking, heads of systems are designated 'grandmaster' by default. You just have to make sure that the system is legitimate and not something cooked up overnight by someone who just wanted to inflate their rank. Like I've said in previous posts, these people often end up exposing themselves for the phonies that they are eventually.
At any rate, these are just my addle-brained opinions and should be taken with a grain of salt...or a salt lick.
Cthulhu