The impact of integration into multinational supply chains on the performance of Chinese domestic firms was investigated, using supplier-customer transaction data from Chinese listed companies between 2011 and 2022. A multiple-period difference-in-differences methodology was employed. It is found that participation in multinational supply chains significantly enhances firm performance. This results is robust across various robustness checks. Positive performance effects are observed across manufacturing and service industries, firms of different ownership types, and multinational corporations headquartered in high-income and upper-middle-income countries. Further research identifies two mechanisms underlying these effects: knowledge spillovers and signaling. Collaboration with multinational corporations fosters firms' innovation capabilities by facilitating the adoption of advanced technologies and management practices. Additionally, such partnerships enhance firms' reputation and ease financial constraints, further driving performance improvements. Notably, even firms indirectly supplying multinationals benefit significantly, underscoring the broad positive impact of supply chain networks beyond direct supplier relationships. These findings highlight the importance of multinational supply chain integration in promoting firm development in China, offering fresh insights into strategies for enhancing innovation and financial strength.