The Chile international is on the brink of agreeing to depart The Emirates Stadium having entered the final 12 months of his deal in north London.
And The Sun report that a deal to take Sanchez to City has moved a step closer after the Arsenal star turned down an offer of £400,000-a-week to join Chinese Super League club Hebei China Fortune.
Fortune, whose squad includes former Arsenal forward Gervinho and Argentina international Ezequiel Lavezzi offered Sanchez the chance to make £21m-per-year after tax, but instead he will remain in the Premier League where he will earn significantly less.
City have been heavily linked with a move for the 28-year-old since they missed out on a deadline deal in August when Arsenal pulled the plug on the agreement after running out of time to sign Thomas Lemar as a replacement.
The Independent have since claimed the runaway Premier League leaders will bid £50m for Sanchez in January in order to lure him to the Etihad Stadium as Pep Guardiola looks to reunite himself with a player he coached for three years at Barcelona.
The Manchester Evening News understand that Guardiola has asked the City hierarchy to finance signings for the future in January but it remains to be seen whether that spending spree will include Sanchez, who will be 29 by the time the window opens in the New Year.
After securing a record 15th Premier League win in a row against Tottenham Hotspur, Guardiola was asked about a possible move for Sanchez in the coming weeks and delivered a naturally coy response.
"Good question," he responded according to M.E.N. "I don't know, believe me. I don't know what we are going to do."
Meanwhile, Arsenal manager Arsene Wenger is adamant Sanchez will remain at the club for the duration of the final year of his contract despite speculation over a January move.
The Frenchman has been forced to contend with Sanchez and Mesut Ozil entering the final year of their contracts with no sign of an extension forthcoming, with both players potentially free to leave next month.