Retail sales of passenger cars in China declined 17 percent in May from the same period a year ago, narrowing by 17 percentage points from the previous month, an industry association said Wednesday.

Over 1.35 million passenger vehicles were sold in May, up 30 percent month on month, according to a preliminary calculation by the China Passenger Car Association.

China's auto market is gearing up for recovery as the COVID-19 impacts wear thin and the policy incentives take effect, the car association said.

In the latest move, China has decided to slash the purchase tax by half for passenger cars under 300,000 yuan (about $45,022) with engine displacements within 2 liters purchased between June 1 and December 31 this year.

The tax, which usually stands at 10 percent of a vehicle's sticker price, has now been cut to 5 percent.