Diamond-cutting companies in Qingdao, Shandong province, are struggling to survive because their orders have fallen by half and they have maintained their focus on small stones, Li said.

Guangdong, Shandong and Zhejiang provinces are China's major diamond-cutting centers. The nation is the world's second-largest diamond processor after India. Guangdong alone accounts for 70 percent of the country's diamond-processing activity.

Guangdong's diamond industry grew as companies relocated from neighboring Hong Kong starting in the late 1970s, when the reform and opening-up began. At least 95 percent of Hong Kong-based jewelry brands' products are made in Panyu.

Guangdong province now has a complete industry chain encompassing design, processing and logistics.

Guangzhou, the provincial capital, recorded diamond trade transactions of $3.59 billion in 2013, one-third of the country's total. Panyu, a district in the city, contributed 60 percent of that figure.

The province announced plans on Nov 11 to build the Guangzhou Diamond Trading Center. It will also seek approval from the central government to establish a diamond exchange, the country's second after the Shanghai Diamond Exchange, according to Guangzhou Mayor Chen Jianhua.

To address rising labor costs in the Pearl River Delta, Li's company has cut its workforce in half to 1,000 people through the use of advanced equipment. For example, it bought a diamond-cutting machine worth 6 million yuan in 2010.

Yuan said that workers can earn 4,000 yuan to 5,000 yuan a month but it is still difficult to recruit sufficient staff.

The statutory monthly minimum wage in Panyu surged from 770 yuan in 2008 to 1,550 yuan in 2013. But the fees clients pay to have diamond cut and processed "have remained almost the same in the past 10 years", said Li.

Diamond-cutting also demands workers with more education and technical training than many other industries. Yuan said that the company requires at least a high school degree, and it takes one year for a worker to become proficient.