German luxury car maker BMW said on Thursday it had received approval to set up an auto financing unit in China, becoming the latest foreign automaker to tap the country's fledgling but potentially lucrative auto financing business.

BMW Automotive Finance (China), a 500 million yuan ($73.98 million) tie-up between BMW and its China car venture BMW Brilliance Automotive, is expected to start operations in the fourth quarter of this year, BMW said in a statement.

It will offer retail and wholesale financing services as well as leasing services to support BMW models sold in the country, it said.

Even as China's auto sales sizzled last year at the height of the global meltdown, just 10 percent of Chinese car buyers used loans to make their purchases due to the country's strong cash culture, industry executives say.

That compares with 70-80 percent in mature markets.

Still, foreign firms including General Motors, PSA Peugot Citroen and Toyota are hoping to sell vehicle financing services to a new generation of young, upwardly mobile Chinese who, unlike their parents, do not feel a need to pay for everything with cash and are not afraid to borrow.

BMW first started offering auto financing services in China in 2007 under a cooperative agreement with Shenzhen Development Bank Co, it added.

Separately on Thursday, BMW's China president, Ivan Koh, said it will add 35 dealers in China to its distribution network, bringing its total in the country to 200 by the end of the year.

Koh told reporters at an industry event in the southwestern city of Chengdu that BMW is optimistic about its full-year growth in China after its sales in the country jumped about 90 percent in the first eight-months from the year ago level.

($1=6.759 Yuan)

(Reporting by Fang Yan and Alison Leung; Editing by Ken Wills)