I thought China's "official producer" is only operating at 50%...

I thought China's "official producer" is only operating at 50% capacity? (while losing money, so can not raise the utilization.) If so, then when illegals are stopped, they can use the remaining 50% capacity to meet the domestic need. The key is, they can then raise the price and stop losing money (or lose less). Without illegals, the official producer has more control on price.
My speculation is, they allow illegals not because they need the supply, but to saturate the market hoping Lynas will die. Now that Lynas is unlikely to die for 4 years, they may just kill the illegals and use their own capacity.
Let me know if this argument make sense?