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Article Highlights:
Chinese investment in Europe has risen to a seven-year high. While corporate expansion is nothing new in modern times, challenges emerge when large global companies—along with their myriads of subsidiaries—become sanctioned.
On April 23, 2026, the European Union released the 20th package of sanctions against Russia. Contained amidst the package was a Chinese semiconductor company, Yangzhou Yangjie Electronic Technology Co., Ltd. based in China, along with one of its subsidiaries, Micro Commercial Components (MCC).
The critical risk that many companies missed was the connection between MCC and its parent company, Yangzhou Yangjie. When companies aren’t able to recognize these risks ahead of time and mitigate them proactively, the most important factor in responding to impending sanctions-related disruptions is speed.
Over the past several decades, there’s been an explosion in growth from many Chinese companies. Buoyed by a large domestic economy and quality products and services—which are often adapted to local markets—many Chinese businesses are now looking to expand abroad via subsidiaries and acquisitions. In fact, in industries like automotive, Chinese companies are actually incentivized to pursue higher margins and more opportunities abroad, rather than compete in a notoriously competitive domestic market.
A recent Rhodium Group report noted that Chinese investment in Europe has risen to a seven-year high. While corporate expansion is nothing new in modern times, challenges emerge when large global companies—along with their myriads of subsidiaries—become sanctioned.
For compliance teams globally, tracking sanctioned companies’ subsidiaries can become a large headache very quickly, as available data is spotty at best, especially around sanctioned entities. While many public companies have widely available data around entities they own or control, the data around private companies is much less transparent and accessible. People often need to piece these ownership structures together through a variety of publicly-available sources that vary in quality and reliability.
In the case of many Chinese, Russian, and Iranian companies—which represent the majority of sanctioned entities in the U.S. and the EU—many entities obfuscate their subsidiaries, and exercise “control” of affiliated companies by utilizing their management staff on the board of the affiliated company. The well-publicized case of the U.S. government alleging that Huawei CFO Meng Wanzhou was on a board of a supposedly unrelated company (Skycom) selling products to Iran is a main example of this behavior. The government had alleged that Huawei was effectively “controlling” a company using a parallel management structure, even though Huawei didn’t have direct shareholding of the company.
Tracking Company Acquisitions and Beneficial Owners Is Easier Said than Done
For many compliance teams, simply understanding who the beneficial owners of a company are, and who controls a given company, are key due diligence points that are checked off as suppliers are onboarded. However, without a continuously updated database of supplier data, investigating beneficial ownership can become very tricky.
When making an acquisition, most public and private companies will issue a statement or press release announcing the acquisition details and important dates. But not every press release is picked up initially, and many companies don’t always keep announcements on their websites for years after the fact if they are operating independently. Identifying management control of a company can also be a challenge.
Creating profiles of executives and tracking their involvement across companies is an art as much as it is a science. Executives with similar names and nicknames that are used differently across the companies they work with can make for a large analysis headache. Challenges around beneficial owners and corporate control are also magnified at smaller companies that are acquired and may not have websites, while offering limited disclosures to customers. In these scenarios, understanding beneficial ownership can feel like an immense task for compliance teams.
While many of these issues exist on the margins of compliance efforts—and may not be a concern for the majority of a supply base—the reality is that many companies have potential sanctions or supply chain risks lurking just under the surface of some of their suppliers. One recent real-world case involving the company Micro Commercial Components highlights the need to understand ownership and management risks associated with one’s suppliers—as well as the harsh realities that can come for companies that don’t invest in thorough due diligence.
Nexperia, Yangzhou Yangjie, and MCC: A Cascade of Shifting Supply Chain Challenges
In October 2026, Dutch chipmaker Nexperia was sanctioned by the United States as a part of the BIS Entity List. While Nexperia itself was not directly listed, because listed company Wingtech Technology owned at least 50% of Nexperia, the newly started BIS 50% rule triggered sanctions on Nexperia, too.
At the time, Nexperia was a major semiconductor supplier to European automotive suppliers, who then needed to identify alternate components in order to minimize disruptions to their supply chains. Many companies migrated procurement to companies like Yangzhou Yangjie and Micro Commercial Components (MCC), which provided alternate components to those produced by Nexperia. While this solution worked in the short term, the supply chain stability for these automotive electronic components became a problem less than a year later.
On April 23, 2026, the European Union released the 20th package of sanctions against Russia. Contained within the package was a Chinese semiconductor company, Yangzhou Yangjie Electronic Technology Co., Ltd. based in China. According to EU Law, when an entity is sanctioned via an EU package, any entity that is owned (50% or more) or controlled by the sanctioned company, or otherwise causes the target entity to financially benefit, is also sanctioned. In practice, this means that subsidiaries and many joint ventures underneath a target company are also sanctioned. When Yangzhou Yangjie was sanctioned, one of its subsidiaries, Micro Commercial Components (MCC), was also sanctioned due to the EU’s 50% ownership rule.
What made this case unique, though, was the fact that MCC is actually an American company based in California. This led to a somewhat unusual scenario where a manufacturing company in the U.S. became indirectly sanctioned by the EU due to a unique ownership structure. And it rapidly led to supply chain disruptions for MCC’s EU customers.
While Yangzhou Yangjie did divest ownership of MCC—allowing the company to resume normal business with European customers—the supply chain disruptions that occurred forced many companies to search for alternative suppliers for the second time in less than a year.
Lessons From MCC and Yangzhou Yangjie
The critical risk that many companies missed was the connection between MCC and its parent company, Yangzhou Yangjie. In addition, Yangzhou Yangjie was already engaged in a pattern of behavior that made it uniquely vulnerable to becoming the target of sanctions.
Yangzhou Yangjie was identified as engaging in the behavior that would lead to sanctions on it by the EU as early as 2024. Understanding the ownership structure of MCC and the risks associated with its parent company could have reduced exposure to a risky company—or at least configured alternative options for EU businesses.
When companies aren’t able to recognize these risks ahead of time and mitigate them proactively, the most important factor in responding to impending sanctions-related disruptions is speed. When businesses already have a manufacturing outage due to supply chain gaps stemming from sanctions, they often implement an “all hands on deck” approach to identify an alternate course of action. In these circumstances, the speed of due diligence is critical, and waiting weeks for survey responses of potential replacement suppliers is too long. For cases like these, out of the box data for compliance teams can become crucial.
How Z2 Sheds Light on Supplier Relationships
For companies that have just been informed of expanded due diligence requirements by their downstream customers—or have a new mandate due to changing government regulation—one key consideration is the amount of resources and bandwidth that businesses are willing to devote to the compliance objective. Without an out-of-the-box data source, surveying suppliers and searching for publicly-available information becomes the main methods that teams use to seek out the necessary compliance data.
While surveying and public research may eventually yield the required results, how long will it take? For just one tier of suppliers, surveys could take weeks or even months—and that’s to say nothing of obtaining the same information for the second, third, or fourth supplier tiers.
Compliance tool Z2 provides out-of-the-box insights on over one million companies, including relationship and sub-tier information, beneficial ownership data, and other risk information on sanctions, financial risk, and manufacturing locations. This data can jumpstart your compliance team’s efforts to audit your existing supply base or investigate suppliers before your company onboards them.
Z2’s team of human analysts are experts at reviewing ownership and management and relationship data, and are constantly searching for any and all available updates on your suppliers. A subscription to Z2 amplifies your compliance team’s efforts by allowing them to focus on the risk analysis rather than the tedious work of data collection.
To learn how Z2 can help businesses bolster their compliance team’s efforts, schedule a free trial with one of our product experts.
