HANGZHOU, China-When Wu Songyun, 35, worked in international trade in the Chinese city of Chengdu, she was chronically stressed from long work hours and demands from a tough boss. She often struggled to sleep. In 2024, she quit to launch TideFlow, an app that tracks sleep, provides meditation exercises and offers recommendations for better rest.

"The work pressure was overwhelming," said Wu. "Now, I am better."

But her app-launched into a cutthroat market in China-has yet to take off. TideFlow has only about 1,000 users, around 35 of whom are paying customers. Her company runs on a loss every month.

Wu is part of a wave of young people in China starting companies with only one employee. Aiming to escape the rat race and find opportunities for work in a bleak job market, the founders use artificial intelligence to code, communicate with customers and promote their products. Last year, more than seven million new one-person companies-which also include businesses beyond AI-startups-were established in China, up around 42% compared with 2024, according to state media.

Worried about soaring youth unemployment, Beijing is embracing this new entrepreneurial boom. Local governments offer subsidized housing and office space as well as computing-power vouchers to access AI more cheaply. Hundreds of micro-enterprise incubators, some supported by the government, are popping up in tech hubs like Hangzhou and Shenzhen.

"AI is causing all these job displacement concerns," said Guo Shan, a Shanghai-based partner at the advisory firm Hutong Research. One-person companies are "an employment opportunity," she added.

So far, these tiny enterprises haven't become a major economic force-they face fierce competition across China's high-tech sectors and many aren't making much money. But for China's government, solo entrepreneurship has the potential to tackle two urgent priorities: accelerating AI adoption in a race against the U.S. for tech dominance, and absorbing young people who are struggling to find the right jobs.

Solo entrepreneurship is also taking off in the U.S. OpenAI CEO Sam Altman has predicted that AI would lead to the first one-person company worth $1 billion.

Companies in China benefit from cheap operating costs, including inexpensive open-source models from Chinese AI firms and proximity to China's dense manufacturing supply-chain networks.

Yet for Gen Z and millennials in China, where youth joblessness is far higher than in the U.S., entrepreneurship can be more of a necessity: Some start one-person companies after being laid off from a big tech firm, while others seek an alternative to the brutal grind of China's corporate culture.

At one community for solo entrepreneurs in Hangzhou called Honghub, this search for autonomy is on full display. On the 13th floor of a high rise, elevators open up to a light-filled office with cactus plants, a small library and a coffee bar. Signs encourage people to "fight for what you want" and "ban anxiety." A red letter box near the office entrance allows members to write messages to their future selves.

Honghub was founded last September by Johnny Zou, an investor based in Hong Kong. It is home to more than 50 one-person companies, many of which receive up to $50,000 in startup funds from the incubator. About a third of the founders are serial entrepreneurs, Zou said, while a third previously worked at a big tech company.

Hangzhou is a good home for Honghub because it is an e-commerce and AI hot spot. Alibaba, one of China's biggest tech companies, and DeepSeek, China's AI darling, are based nearby.

The local government is actively trying to attract these communities. The city's Shangcheng district, where Honghub is located, launched a new plan in March to attract 1,000 solo operators this year. The district is allocating more than 200,000 square feet of office space and establishing a nearly $150 million fund for these projects.

But even with the backing of incubators and the government, solo ventures confront real challenges. Founders say it is hard to find investment and customers. These firms face extreme "involution" in the Chinese economy that is also trapping electric vehicles, e-commerce apps and batteries in a cycle of zero-sum competition. More than half of one-person companies make less than $1,000 a month in revenue, according to a survey of 1,500 of such firms conducted by Honghub. In other words, these businesses won't be the silver bullet Beijing needs to solve youth unemployment.

Haoyu Liu was working as a software engineer at an e-commerce company in New York when he realized that, to survive the AI era's rapid automation and waves of layoffs, he needed to be his own boss. Plus, working as a cog in a big tech firm didn't suit his personality-he wanted freedom.

Last year, he moved back to China, where he was born, to build an astrology app. Liu, 29, ran the entire operation alone, using AI to design the app, manage administrative tasks and write marketing material. "I'm embracing this technological wave instead of going against it," he said.

But just a few months later, after never moving to monetize the astrology business, Liu decided to pivot to build an AI gaming app. He is now developing the prototype for the game, called Hunger Agents.

One-person firms like Liu's often cycle through business models. After achieving success, some firms shed their solo status by adding employees or getting acquired by a larger firm.

"It's hard to actually get orders and business revenue," said Bob Chen, a Shanghai-based investor at venture-capital firm BVF, who hasn't invested in single-person companies. "Most of them are making something others have made. They don't have a long term plan."

For some founders, staying small is just fine. Compared with the moguls who started companies during China's go-go years, like Alibaba's Jack Ma, many solo entrepreneurs are just looking to live cheaply and be self-sustaining.

"We enjoy how much freedom entrepreneurship gives us," said Liu, the Hunger Agents founder. "You can take a break whenever you want," he said, watching a small goldfish circle a glass bowl on his desk in the Honghub community.

AI has made this micro entrepreneurship possible, especially for people without coding experience. Three quarters of solo founders have no technical background, according to the Honghub study.

Arvin Chen, a founder at Honghub who is developing a microphone device that allows users to directly speak with AI agents, said that AI has entirely transformed startups. The 25-year-old sleeps on a small camping bed in the Honghub office under a poster for "Her," a 2013 movie about a man falling in love with an AI operating system. He uses AI for everything, from video editing and back-end coding to scheduling hangouts with friends.

"People who have thought about doing something in the past-now they can stop thinking," he said.