Inside the steaming walls of a nightclub in the heart of one of the world’s most dynamic cities, you can hear the sounds of the future. Hundreds of people gyrate rhythmically as a DJ spins hot beats. On stage, a pair of rappers face off, microphones in hand, trading verses of improvised rhyme. They look like typical hip-hop artists, dressed in baggy pants and baseball caps. But listen closely and you notice something unusual: They’re performing in Chinese. One rapper spits out words in a distinctive Beijing accent, scolding the other for not speaking proper Mandarin. His opponent from Hong Kong snaps back to the beat in a trilingual torrent of Cantonese, English, and Mandarin, dissing the Beijing rapper for not representing the people. The crowd goes wild, raucously voicing delight and dismay.

This annual rap battle, called the Iron Mic, isn’t taking place in New York or Los Angeles, but in Shanghai, where its founder, 32-year-old Dana Burton, has unexpectedly found fame and fortune. The Detroit native arrived in China in 1999 to take a job teaching English. During his first week in town, he went to a nightclub that advertised hip-hop music. But the closest thing to hip-hop was a Michael Jackson impersonator. So, Burton embarked on a mission to bring the real thing to the Middle Kingdom. “I thought about what I could offer China,” he says. “It was hip-hop.” Burton began to moonlight as a rapper and developed a following. He not only performed himself but also helped others—foreigners and Chinese—get their own acts off the ground by hosting parties and hip-hop nights such as Iron Mic. Admirers called him “the godfather of Chinese hip-hop.”

Burton soon began to promote tours for famous hip-hop artists visiting from the United States. Today,...