Hong Kong ( CNN ) -- Buoyed by the runaway success of `` Gangnam Style , '' the South Korean company behind music sensation Psy is taking on what has been a tricky market for international record labels to crack -- China . `` While our previous activity in China had been putting on concerts occasionally , we will now be setting up an office in China and aggressively pursue the China market , '' a representative for YG Entertainment told CNN in Seoul . YG is one of three South Korean companies that have largely been responsible for Hallyu -- the Korean wave of sugary and attractive girl and boy bands that have taken Asia by storm over the past decade . And China has not been immune to K-pop 's allure . YG 's chief operating officer Choi Sung-jun says that acts like Psy , boy band Big Bang and rapper G-Dragon are extremely popular among Chinese fans . G-Dragon 's concert on Friday and Saturday at Hong Kong 's Asia World Expo has been completely sold out , he added . China 's airwaves have been dominated by Chinese-language `` Mandopop , '' but tastes are evolving as the internet gives young people access to different types of music , says Nathaniel Davis , operations director of China-based music industry consultancy Splatter . However , high rates of piracy on both digital and physical products make it very difficult for a label to discover steady revenue streams . `` Labels can not function or sustain themselves from record sales revenues and so much of their income comes from the 'other ' ways artists generate revenue -- endorsements , commercial appearances , ringtone sales , and live shows , '' Davis says . Reflecting these challenges , Choi says the company 's initial focus in China will be on making money from concerts . In March , music giants Universal , Warner and Sony , along with China 's Gold Typhoon Entertainment , settled a hard-fought music-piracy law suit with Chinese Internet company Sohu that will see the record companies receive royalties and licensing fees . The labels reached a similar agreement with search engine Baidu in 2011 . Despite being the world 's second largest economy , China ranks 20th globally in terms of recorded music revenue , according to the International Federation of the Phonographic Industry ( IFPI ) . In 2012 , recorded music revenues totaled $ 92.4 billion , up 9 % from 2012 but equal only $ 0.1 per person . Digital downloads accounted for more than 80 % of sales in China , compared with 42 % globally . China is aware of the problems facing the industry and is concerned that it has not produced a act of global or even regional standing . `` Psy 's success seems to be haphazard but it is n't , '' Zang Yanbin , president of the China Record Working Committee told the China Daily in March . `` Behind Gangnam Style are great efforts by the Korean government and music companies to develop and promote Korean pop music . The Chinese government should also try to create better environments for Chinese pop music . '' YG 's ambitions are not limited to China . The company recently incorporated in the United States and speaks of a `` digital silk road '' spreading K-pop to the world . Last year , the music video to Psy 's Gangnam Style went viral to become the most-watched video on YouTube . The song was also the third best-selling single of the year , according to the IFPI , and has helped boost the financial fortunes of YG . The company , which went public in Korea in 2011 , reported a 45 % increase in net income to 18.8 billion won ( $ 17 million ) in 2012 . YG said it was too early to say whether they planned to develop local Chinese acts or simply promote their existing artists in the country . But one novel strategy has been adopted by rival SM Entertainment , which is trying to make inroads into the Chinese market with Exo -- a boy band that performs their songs in Mandarin as well as Korean . Journalist Frances Cha in Seoul contributed to this report .
Psy 's record label plans to expand in China . YG Entertainment seeks to capitalize on K-pop 's popularity . But piracy makes it hard for record labels to make money . China ranks 20th globally in terms of recorded music revenue .