In the US, when the US gov borrows money, the treasury department will issue different debt securities with different maturity and interest rate.
When demand is low, and interest rate may shoot up. Meanwhile, the Fed may step in to buy treasuries in the open market, by crediting (increasing) reserve accounts banks hold at the Fed. Also Fed needs to pay interest for these reserve accounts, it doesn’t really matter that much – the loss Fed made can be earned in the future. In normal times, the Fed’s profit will go to the treasury department.
So everything looks like magic and money is just created from the air.
The only process that needs the public to participate is the US treasury auction and the Fed can’t buy directly.
In China, property looks just the same.
When a city gov borrows money, it will sell the use right of a land. If that’s for residential, then they will be held by homebuyers eventually. When demand is low and deficit is high, home price shall drop.
So developers are like the banks participate in US treasury auction. But who is the Fed in this case?
It’s interest that China has thought about the idea of buying back unsold homes.
In some cases, homes will be auctioned by banks if the homebuyers default. Anyways, there is excess supply on the market and demand is not strong.
The problem is this is not central gov’s deficits. Local gov doesn’t have a “Fed”. Maybe some local SOEs can act like Fed in this case to buy properties back?
But these local SOEs can’t just buy by creating “reserve accounts” at local banks.
Sure they must have good relations. So basically local banks need to lend to local SOEs and not to worry about these “reserve accounts”. Put it another way, banks need to swap the homes (treasuries) with local SOEs promises (reserve accounts).
You see, this has become very complicated and is not as smooth as printing money in the US.