From 1898 to 1914, the German Empire administered the leasehold of Kiaochow Bay in Shandong Province and constructed the port city of Tsingtau as a self-proclaimed model colony. This paper studies the master plan for the construction of that city and believes that urban planning, although presented as a neutral tool of civil engineering, was in fact a method of colonial rule. The German administration divided the urban area into a European quarter, a Chinese business and residential area, and two peripheral workers' villages, and reinforced this spatial division with a separate legal code for Chinese residents only. Both measures were based on racist ideas and sought to demonstrate the technological superiority of Europeans over the native people. The paper also shows that the desired separation was never realised. German firms depended on Chinese merchants, wealthy Chinese families acquired property in the German quarter, German residents settled in Chinese districts, and German households relied on Chinese domestic servants. Negotiation with Chinese officials, missionary conflict, a commercial boycott, a joint German-Chinese college, and a hybrid architectural idiom all followed from this daily contact. Colonial Tsingtau is therefore better understood not as a unilateral projection of metropolitan power but as a negotiated space in which segregation on paper repeatedly gave way to interaction on the ground, producing an early bridgehead of Sino-German cultural exchange.