During the summer, City were prepared to pay in excess of £50m for Sanchez, whose contract at the Emirates Stadium expires at the end of the season.
Arsenal boss Arsene Wenger has previously insisted that the Chilean international would see out the remainder of his deal but on Thursday, the Gunners manager claimed that the club were open to selling their star man at the start of 2018.
According to The Mirror, City remain interested in the possibility of signing Sanchez midway through the campaign, but head coach Pep Guardiola is not willing to pay over £20m when City can sign the attacker for nothing in July.
Sanchez has allegedly identified City as his first-choice destination, leaving the North-West outfit in a position where they feel that they do not need to go out of their way to compete with rival bids.
The 28-year-old has contributed just one goal in seven games this season in all competitions.