Yao, speaking to journalists, also stressed on the need for compliance with international laws and hoped that both Pakistan and India would "take a suitable decision for the betterment of the Kashmiri people", Ary News reported.
Yao said that de-escalating tension between Islamabad and New Delhi would be beneficial for the entire region.
He said that being a permanent member of the United Nations Security Council, China had special responsibilities in connection with restoration of peace and stability in the region.
The envoy was echoing what Beijing said on Tuesday.
China's Foreign Ministry spokesperson Hua Chunying on Tuesday voiced "serious concern" over the Kashmir situation and stressed that Kashmir is "a legacy of history between India and Pakistan". Beijing also said that New Delhi should avoid actions to "unilaterally change the status quo" of the state, and termed the decision to reorganise Ladakh as a union territory as "unacceptable".
In another development, the International Commission of Jurists (ICJ) had said the Indian government's revocation of special status of Jammu and Kashmir violates the rights of representation guaranteed to Kashmiri people under the Indian Constitution and in international law.
ICJ's Secretary-General Sam Zarifi, in a statement, said the Indian Judiciary should look closely at serious violations of proper legislative and constitutional processes.
( With inputs from IANS )