Jazz at this time was the thing to do for nightlife, and Shanghai was the centre of jazz in China.
Jazz was introduced to the city through the foreign concessions in the 19-teens. The International Settlement and the French Concession both regularly had jazz musicians, often coming from the United States. The interest in jazz spread to the Chinese population shortly after. It survived well into the 1940s there. It stopped primarily as a result of being banned by the Communists around 1949.
Prior to that, big bands and jazz orchestras were quite common at the jazz cabarets throughout the foreign concessions. The reception among members of Chinese society was also generally positive toward the style. Shanghai in the 1920s was a place you went to experience something new, usually directly a result from the mix of cultures to be found there. Modernising and urbanising means adopting the latest trends, and Shanghai at this time was right in line with the trends found in bigger cities in the West.
These were also some of the few places that foreign residents of the concessions and native Chinese could actually co-mingle. They not only offered an outlet for the residents of the city, but were also a profitable front for the various gangs that managed much of the city at the time. One of the larger gangs, the Green Gang, even put together the first jazz band made entirely of Chinese musicians in 1934. Called the Breeze Dance Band, also translated as Clear Wind Jazz Band (清风舞乐队), it was originally pushed for by Dù Yuèshēng 杜月笙, one of the most prominent mobsters of the period, and led by Lí Jǐnhuī 黎錦暉. Lí became a hugely important person in 20th century Chinese music, and was an active proponent of the modern development of Chinese culture.
Additionally as part of the cabarets, gambling and prostitution adapted to the cabarets and it was not uncommon to find "dance hostesses", women who, for a price, would dance and drink with clients for the night. This obviously also resulted in prostitution, but not always.
Even government officials were in on the craze, and Chiang Kai Shek himself had a jazz orchestra playing at his wedding to Soong May-ling.
You can actually find a lot of archival footage of jazz clubs if you dig around a bit.
If you're interested in the topic I highly recommend Andrew Field's work, below.
References
Andrew Field's Shanghai's Dancing World: Cabaret Culture and Urban Politics, 1919-1954
James Farrer & Andrew Field. Shanghai Nightscapes: A Nocturnal Biography of a Global City
See also
Someone asked a similar question some months back. This answer is based largely on my answer from then.
also cc /u/origamitiger, because RemindMe won't work in /r/AskHistorians