Liu Yongqi, general manager of Sino-Crystal, another Henan-based company, said it now produces between 2 million and 3 million carats a year, over half of which are for jewelry.

"We began our transformation in 2014 to expand to gem-grade diamonds," said Liu, citing over-competition for industry use and a "blue sea" consumer market.

"It is important to understand that even if synthetic diamond production is initially lower quality, the diamonds can be 'enhanced' with processes that turn lower quality goods into higher-quality," Paul Zimnisky, an independent diamond analyst in New York, told Xinhua.

If even a fraction of Chinese production is upgraded to jewelry-quality diamonds, it would have a very significant impact on the global supply which is only in the low-millions-of-carats, Zimnisky said.

"China, and by extension Asia, is the main producer of synthetic diamonds," Margaux Donckier, spokeswoman for Antwerp World Diamond Center, told Xinhua. "Synthetic goods only represent about 3-5 percent of the [consumer] market, but the share is growing rapidly."