In May a total of 1.28 million sedans, sport utility vehicles (SUVs), multi-purpose vehicles (MPVs) and minivans were sold in the country, the China Association of Automobile Manufacturers (CAAM) said. In the same month of 2011, that number was 1.04 million.

From January to May, deliveries climbed 5.5 percent to 6.33 million, continuing an uptrend which started in April.

The strong rebound by Toyota Motor (7203.T) and Honda Motor (7267.T), which both suffered severe shortages of parts a year ago after northern Japan's devastating earthquake and tsunami in March 2011, also pushed up the monthly tally.

Demand is likely to remain solid if Beijing renews some of its policy incentives which helped propel China beyond the U.S. as the world's largest car market by volume in 2009, industry observers say.

"The incentives will help bolster demand for minivans, and cheap cars like (the) QQ, which are popular in lower-tier cities and rural areas," said John Zeng, Asia Pacific director at industry consultancy LMC Automotive. "If such policy incentives do come out as expected, sales in the second half would definitely be better than the first half."

A source told Reuters late last month that Beijing would soon resume paying subsidies to rural residents who trade in old vehicles for new, fuel efficient ones to rekindle automobile demand amid a market slowdown.

Beijing introduced a series of stimuli in 2009, including tax incentives for small cars, but China's auto market slowed significantly in 2011 after the policies expired, with annual car sales climbing 5.2 percent, down from a 33 percent and 53 percent annual gains in 2010 and 2009 respectively.

In the United States, automakers posted strong May sales gains from a year ago, but the sales rate still fell short of expectations as the broader economy softened.

Toyota and Honda saw their China car sales jumped 105 percent and 92 percent respectively.

General Motors (GM.N) maintained its leading position in China helped in part by a rebound in minivan sales, which contributed to about 55 percent of its monthly tally.

SAIC Motor Corp (600104.SS), a longtime partner of GM and Volkswagen AG (VOWG.DE), was the big domestic winner with a year-on-year growth rate of 20.9 percent in May.

(Reporting by Fang Yan and Ken Wills; Editing by Daniel Magnowski)

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