Rather than repeating what I said in the past, I was able to find this, someone did an entire research paper on Chinese mining industry with some decent data on illegal mining activities, here China’s public policies toward rare earths, 1975–2018

Please read the section starting and continue from “2010–2015: further and broader restrictions and the World Trade Organization dispute” through the end. I can’t quote everything, its very detailed and its a good read so I’ll just quote the absolute minimum.

The efficiency of export quotas and smuggling

Illegal RE products also escaped through the border of China and undermined the effectiveness of export quotas. China’s illegal RE exports were significant. For example, the export quota in 2008 was 57,000 t of RE gross products. However, Europe, USA, and Japan imported about 71,000 t of RE products (metals, compounds, oxides, and so on) from China, which is 14,000 t higher than the maximum legal export (Schüler 2011). Table 2 shows, except for 2009, the reported import of RE products from China was greater than the reported Chinese export for the same basket of products for the period 2009-2013.

Yes that was a long time ago, however it was relevant given China had done exactly this same export ban against Japan in 2010. Of course in the years after China became more aggressive in combating it but it is not so simple, the paper talks about all of this.

Environmental damages are highly related to illegal mining. Simultaneously, the government used environmental requirements to restrict illegal RE production. The crackdown on the illegal and black market activities mainly led by MLR and MIIT started in 2010 and was aimed at investigating and punishing illegal mining, processing, and trading. A crackdown campaign ending in April 2017, led by the RE office and with the participation of other related ministries, included investigations in 23 provinces and inspections of 415 firms in the RE supply chain. Figure 14 shows that there were such administrative activities in almost every year, which implies that the problems of illegal production are complicated to deal with for the central government (MLR 2010b; MIIT et al. 2011a, b; MIIT 2012c; MIIT et al. 2013a; MIIT et al. 2014, MIIT et al. 2016, MIIT 2017c).

If you can find other and better data that says otherwise be free to post it, as such this is not easily available in English to begin with maybe CN sources are more definitive. I hope this makes the point its not like it didn’t ever happen or is impossible.

My assumption was always illegal mining can and does leak into the black market and likewise because illegal miners do not need licenses these quotas do not work and these minerals can then flow elsewhere through middleman just like Russian oil from India.

No my assumption is not that the US will keep going business as usual through smuggled Chinese minerals even if that was possible in enough quantities, no even in the best case its a small portion that can be used for the absolute top priority uses by the Pentagon and such.

However with people acting as if this is a grandslam/checkmate move it is just naive given the previous history here. This was the same as that China issuing bonds in Saudi Arabia narrative.

China already tried quotas and export controls. The Japan dispute and the WTO dispute. Could you tell that after banning those exports in 2010, China would be smiling and shaking hands with the US President despite the escalations over the next almost 15 years?

Regardless of any black market issues, what China is doing is more about escalating IMO, the US will need to find long term solutions, but likewise China is not looking to actualy start this trade war by themselves. This is a “I’ll take you down with me” move even if temporarily.

The difference is some people thinking this mineral issue will prevent future escalations from the US, it probably will not.