YG Entertainment, the record label and agency that represents South Korean pop sensation Psy, plans to expand into the China market by setting up a firm on the mainland this year. "We now have more confidence after Psy's global phenomenon and Big Bang's world tour [last year]. So probably we can put more resources and invest more into the Greater China market, which we believe will be the next big market next to Japan," said YG chief operating officer Simon Choi Sung-jun. Last year, the music video to Psy's Gangnam Style single went viral to become the most-viewed video on YouTube. It has racked up more than 1.58 billion views. The song was the third-best selling digital single in the world last year, International Federation of the Phonographic Industry figures show. Psy's label mate Big Bang - a five-member boy band - made a world tour to 24 cities including Hong Kong last year, with a total estimated audience of 800,000, according to Billboard. Benefiting from its artists' success and the popularity of K-pop, YG reported a 36 per cent year-on-year increase in revenue to 106.55 billion won (HK$757 million) last year. Net income at the South Korean firm, which is listed on the Kosdaq electronic stock market, rose 45 per cent to 18.76 billion won. Thanks to social media websites such as Facebook and YouTube, Choi said the firm was able to expand its reach to audiences throughout the world. Outside Korea, Choi said the company previously focused more on the Japan market, but the overwhelming response to Big Bang's concerts in Guangzhou and Shanghai last year boosted its confidence in expanding to the Chinese market. "We are going to open up a new dedicated entity in mainland China within this year … by collaborating with local partners. We hope to get a dedicated and China-oriented strategy," Choi said, adding the office may be in Shanghai or Beijing. "It'll be very hard to generate income from physical and digital downloads [on the mainland], so we are thinking of … things such as concerts and events that people can enjoy," he said. YG artist G-Dragon, the leader of Big Bang, will hold concerts in Hong Kong on Friday and Saturday at the AsiaWorld-Expo. Choi said about 50 per cent of YG's revenue was from its home market last year, while the rest was from overseas, primarily Japan. This proportion is expected to shrink as the group expands internationally. Other Korean entertainment firms are seeking inroads into the mainland market. SM Entertainment, for instance, has debuted groups with Chinese names or Chinese members to tap into the market. Hyundai Securities analyst Kevin Jin said South Korean music exports to the mainland had risen from US$1.8 million in 2008 to US$3.6 million in 2010. Choi said YG would continue to diversify by collaborating with, for example, fashion brands to develop apparel or merchandise. Last year, YG and Samsung's Cheil Industries set up a joint venture in the apparel business, Hyundai Securities said.