If we look at the C# language specification, ECMA-334, in section 7.4.2 "Unicode character escape sequences", we find
A Unicode escape sequence represents a Unicode code point. Unicode escape sequences are processed in identifiers (§7.4.3), character literals (§7.4.5.5), and regular string literals (§7.4.5.6). A Unicode escape sequence is not processed in any other location (for example, to form an operator, punctuator, or keyword).  
unicode-escape-sequence:: \u hex-digit   hex-digit   hex-digit   hex-digit
                                           \U hex-digit   hex-digit   hex-digit  hex-digit   hex-digit   hex-digit   hex-digit   hex-digit
So you have to use four hex digits with the \u.
In your example, it takes "001f" as those four hex digits.
The "\u001" in your example should have given an error in Visual Studio along the lines of "Unrecognized escape sequence."