The association said sales were buoyed by government stimulus policies to halve the purchase tax on passenger cars to five percent for models with engines of less than 1.6 liters.

In the first quarter, the area of commercial houses sold rose 8.2 percent to 113 million square meters. Analysts said the rise in sales was mainly driven by surging credit and by stimulus policies, such as tax cuts.

However, overcapacity of the steel industry in China held back steel prices from a rebound. China's crude steel capacity reached 660 million tonnes at the end of 2008, exceeding the output of 500 million tonnes for the whole year.

China plans to cap its crude steel output at 460 million tonnes in 2009, down 8 percent year on year.

Analysts said the steel industry would not see a turnaround until mills limit their output by eliminating outdated capacity.

Machinery industry

China hammered out a bunch of policies since the fourth quarter of last year, which benefited the crisis-hit machinery industry -- including the massive infrastructure construction plan to boost industries of auto and equipment manufacturing, and subsidies for farmers' purchase of home appliances.

These measures, aimed at expanding domestic demand, have paid off. Industrial output of China's large-scale machinery sector rose 5.4 percent year on year in the first two months of 2009.

Farm machinery and automotive sectors performed well. In the first two months of 2009, output of the farm machinery sector rose 21.6 percent year on year, after subsidies were given to encourage farmers to buy farm machinery.

Cai Weici, vice chairman of China Machinery Industry Federation, said the financial crisis would not have an immediate effect on the machinery sector. He expected the fallout would emerge this year, saying the first half of this year might see the slowest growth of the sector and the second half might see a recovery.

According to customs data, exports of mechanical and electrical products declined 20.8 percent in the first quarter.

Textile industry

Wang Tiankai, vice president of the China National Textile and Apparel Council (CNTAC), said faltering exports was the biggest challenge for textile enterprises.

Industry output of major textile enterprises grew 5.8 percent year on year in the first two months.