The team coached by Moise Poida will now compete for a fifth place in their final match of the competition.
The defeat is Vanuatu’s second of the tournament and ended their hopes of securing a medal.
The African outfit lost no time reaching for the semi-final slot when Kenny opened the scoring after just two minutes.
Cape Verde added two further goals by Andradino and Ricardo in a blistering opening eight minute spell that effectively decided the result.
Vanuatu reduced the deficit when Jules Bororoa scored in the 11th minute but Cape Verde reasserted their three goal advantage when Ricardo scored again just before the halftime break.
He completed his hat-trick 13 minutes after the restart.
Goals by Andradino – scoring his second of the night – and a seventh by Kevin confirmed a memorable evening for Cape Verde.
The victory gave Cape Verde access to the semi-finals of the Boys’ Youth Olympic Games football tournament at the first time of asking.
Cape Verde now join Peru, Iceland and Korea Republic in the chase for medal recognition.
Vanuatu now meet Honduras who lost their two group stage games 5-0 and 3-2 against Iceland and Peru in the playoff for fifth place.
Match Details
Match for 5th place
Honduras vs Vanuatu
Monday 25 August, 8.45pm (local time)
Jiangning Sports Centre Stadium
Nanjing, China
For more on Vanuatu football visit www.vanuafoot.vu