Manchester City had previously expressed interest in another Sunderland junior product, goalkeeper Toby Bell, before the 15-year-old left for Premier League rivals Chelsea.
Young is now on a scholarship with Sunderland and cannot sign professional terms until he turns 17 next month, which means he is free to join with another club if he so desires.
However, Manchester City and Sunderland would have to agree on compensation or the matter would be heard by a tribunal.
Sunderland have signed new contracts for numerous first-team players this summer, including Dennis Cirkin, Anthony Patterson, Dan Ballard, and Trai Hume, while teenagers Chri Rigg and Tom Watson have been persuaded to stay despite interest from other clubs.
Young is regarded as one of the greatest prospects among a plethora of brilliant young players, including Rigg, who won the under-15s National Floodlit Cup and then went on to push Manchester City all the way to the under-18 title in an incredible campaign last season.
Young began his football career as a striker but has since switched to goalkeeping and stands over 6ft tall.
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