Densely populated China was viewed as a potential market to be exploited, with thinkers such as Max Weber demanding an active colonial policy from the government.

In 1896, Rear Admiral Alfred von Tirpitz, at that time commander of the East Asian Cruiser Division, examined the area personally, as well as three additional sites in China, for the establishment of a naval base.

Rear Admiral Otto von Diederichs replaced Tirpitz in East Asia and focused on Jiaozhou Bay, even though the Berlin admiralty had not formally decided on a base location.

On 1 November 1897, the Big Sword Society murdered two German Roman Catholic priests of the Steyler Mission in Juye County in southern Shandong.

Admiral von Diederichs, commander of the cruiser squadron, wired on 7 November 1897, to the admiralty: "May incidents be exploited in pursuit of further goals?

With his staff and the three captains of his ships aboard, Diederichs landed with his admirals tender at Qingdao's long Zhanqiao Pier to reconnoiter.

A special unit swiftly disabled the Chinese telegraph line and others occupied the outer forts and powder magazines.

After considerable time and uncertainty, the admiralty finally cabled congratulations and the proclamation was to remain in effect; Wilhelm II promoted him to vice admiral.

The admiralty dispatched the protected cruiser SMS Kaiserin Augusta from the Mediterranean to Qingdao to further strengthen the naval presence in East Asia.

[8] Negotiations with the Chinese government began and on 6 March 1898, the German Empire retreated from outright cession of the area and accepted a leasehold of the bay for 99 years, or until 1997, as the British were soon to do with Hong Kong's New Territories and the French with Guangzhouwan.

Kiautschou Bay was officially placed under German protection by imperial decree on 27 April and Kapitän zur See [captain] Carl Rosendahl was appointed governor.

Although the lease treaty set limits to the German expansion, it became a starting point for the following cessions of Port Arthur and Dalian to Russia to support Russia's Chinese Eastern Railway interests in Manchuria, of the transfer of Weihaiwei and Liugong Island from Japan to Great Britain, and the cession of Guangzhouwan to support France in southern China and Indochina.

On 15 August 1914, at the outbreak of World War I in Europe, Japan delivered an ultimatum to Germany demanding that it relinquish its control of the disputed territory of Kiautschou.

The departments of finance, construction, education, and medical services were directly subordinated to the governor, because these were crucial with regard to the idea of a model colony.

[11] The impoverished fishing village of Tsingtau was laid out with wide streets, solid housing areas, government buildings, electrification throughout, a sewer system, and a safe drinking water supply, a rarity in large parts of Asia at that time and later.

[14] After the 1911 Revolution, many wealthy Chinese and politically connected ex-officials settled in the leased territory because of the safe and orderly environment it offered.