The Rise of Blockchain-Driven Digital Supply Chain Finance in China: De-Core Innovation and Institutional Scalability Reshape SME Lending

China's small and medium-sized enterprises (SMEs) have long faced systemic challenges in accessing financing due to fragmented supply chains, information asymmetry, and limited credit visibility. However, the emergence of blockchain-driven digital supply chain finance (SCF) is reshaping this landscape, offering a decentralized, transparent, and scalable solution to unlock liquidity for SMEs. By leveraging blockchain's inherent features-decentralization, immutability, and traceability-Chinese institutions are pioneering a new era of "de-core" innovation, where traditional centralized financial intermediaries are replaced by trustless, data-driven systems. This shift is not only improving SME lending but also redefining institutional scalability in supply chain ecosystems.

De-Core Innovation: Decentralizing Trust in Supply Chains

Blockchain technology is enabling a paradigm shift in SCF by decentralizing trust mechanisms. Traditional SCF models rely on core institutions (e.g., banks or core enterprises) to vouch for the creditworthiness of downstream SMEs. This creates bottlenecks, as SMEs often lack the collateral or credit history to secure financing independently. Blockchain-driven SCF, however, eliminates the need for a central authority by creating a shared, tamper-proof ledger of transactions across the supply chain.

For instance, Zhejiang MYbank Co., Ltd. has demonstrated the efficacy of this approach. By deploying a blockchain-based SCF platform, the institution has enabled SMEs to access financing based on verifiable transaction data from their supply chain partners. This "de-core" innovation allows SMEs to bypass traditional gatekeepers, as the blockchain's immutable records serve as a decentralized proof of creditworthiness. According to a case study, this model increased financing availability for SMEs by 30% between 2018 and 2022, while reducing supply chain disruption risks.

Moreover, blockchain's ability to address information asymmetry and fraud is critical. A conceptual model published in highlights how blockchain reduces transaction costs and paperwork inefficiencies, fostering trust among stakeholders. This is particularly vital in China's SME-dominated economy, where supply chain concentration and corporate cost stickiness have historically hindered growth.

Institutional Scalability: From E-Commerce to Systemic Resilience

The scalability of blockchain-based SCF is evident in China's e-commerce sector, where platforms like Alibaba and Tencent have integrated blockchain to streamline financing. A recent case study on an e-commerce-centered SCF model reveals that blockchain enables real-time, secure transactions while slashing operational costs. For example, by automating data sharing and access control, blockchain platforms reduce the need for manual verification, accelerating loan approvals for SMEs.

Institutional scalability is further supported by the technology's resilience during crises. A 2025 event study on the pandemic's impact found that blockchain-enabled platforms maintained valuation and trading stability, unlike traditional systems that faltered under supply chain shocks. This resilience is attributed to blockchain's ability to maintain transparency and traceability, even in volatile environments.

Additionally, the integration of blockchain with artificial intelligence (AI) and IoT is amplifying scalability. Research from underscores how these technologies synergistically mitigate supply chain uncertainties, enabling SMEs to access dynamic, data-driven financing solutions. For instance, IoT sensors can track inventory movements in real time, while AI algorithms assess risk profiles, creating a self-sustaining ecosystem for SME lending.

Challenges and the Path Forward

Despite its promise, blockchain-driven SCF faces hurdles. The technology's long-term efficacy depends on robust integration with trust frameworks and information security measures. For example, while blockchain ensures data immutability, it does not inherently address privacy concerns. Institutions must implement advanced access control mechanisms to protect sensitive SME data.

Furthermore, regulatory alignment remains a challenge. China's evolving digital finance regulations require platforms to balance innovation with compliance. However, the government's push for digital transformation-evidenced by initiatives like the 2025 quarterly planning frameworks-suggests a growing appetite for blockchain adoption.

Investment Implications

For investors, the rise of blockchain-driven SCF in China represents a high-growth opportunity. The sector's ability to scale institutional lending while addressing SME financing gaps aligns with global trends toward decentralized finance (DeFi). Key players like Zhejiang MYbank and e-commerce platforms leveraging blockchain are well-positioned to capture market share.

Moreover, the synergy between blockchain and AI/iot technologies opens avenues for further innovation. As 49% of companies in 2025 already use generative AI tools like ChatGPT, the integration of AI-driven analytics with blockchain SCF could unlock predictive lending models, enhancing both efficiency and risk mitigation.

Conclusion

Blockchain-driven digital SCF is not merely a technological upgrade but a systemic reimagining of how SMEs access capital. By decentralizing trust through "de-core" innovation and scaling institutional lending via blockchain's transparency, China is setting a global precedent for financial inclusion. While challenges persist, the sector's resilience during crises and alignment with digital transformation trends make it a compelling investment thesis for the post-2025 era.