Auto sales in China continue to improve in May despite weakening macroeconomic conditions. Vehicle sales in the country grew 16% to 1.61 million units in the month, driven by strong demand for passenger vehicles. According to China Association of Automobile Manufacturers (CAAM), total sales in the first five months of the year increased a tad 1.7% to 8.02 million units.

According to CAAM, passenger car sales jumped 22.6% to 1.28 million units, outstripping the commercial vehicle sales. However, the impressive sales growth during the month can be attributable to depressing comparable month of last year on the back of disruptions caused by the twin disaster in Japan on March 11, 2011.

Auto sales in China is expected to improve further if the government renews some of its policy incentives that helped the country overtake the U.S. as the biggest auto market in 2009. It is rumored that the government would soon resume paying subsidies to rural consumers who are willing to trade in old vehicles for new and fuel-efficient vehicles.

Shanghai Automotive Industry Corporation (SAIC) – the top-automaker in China – sold 367,991 vehicles in May, up 20.9% in the prior year. Sales at its joint venture with General Motors Company ( GM - Analyst Report ) went up 14.9% to 110,503 cars, and with Volkswagen AG ( VLKAY ) increased 9.0% to 100,262 vehicles.

GM’s total sales in China grew 21.3% to 231,183 vehicles. Shanghai GM sales rose 7.1% to 99,113 units while SAIC-GM-Wuling sales went up 35.9% to 127,749 units. Ford Motor Co. ( F - Analyst Report ) sales escalated 8% to 48,608 vehicles during the month.

Toyota Motor Corp.’s ( TM - Analyst Report ) sales more than doubled to 78,700 vehicles in the country.

Meanwhile, Honda Motor Co. ( HMC - Analyst Report ) recorded a whopping 91.7% rise in sales to 52,146 vehicles in May.

In May, U.S. saw a strong 18% growth in sales to seasonally adjusted annual rate (SAAR) of 13.8 million units in May from 11.7 million units in the same month of 2011 driven by lower gas prices, better access to credit, improved trade-in values for new cars, and, as usual, strong pent up demand. All the major automakers posted strong sales gains during the month.

China’s automotive industry outlook is promising in 2012. According to CAAM, car sales in 2012 is expected to grow by 9% in the country, which is much higher than 2011 (5.2%).