Sanchez, 28, was close to joining Manchester City from Arsenal in the summer transfer window.
Pep Guardiola’s side made a deadline day bid totalling £60m, which the Gunners accepted.
However, Arsenal blocked Alexis Sanchez‘s proposed move to the Etihad at the last minute after they failed to land Monaco winger Thomas Lemar.
The Chile international has less than ten months remaining on his current contract at the Emirates.
He has already rejected a new and improved £300,000-a-week deal to remain at the club as he is demanding closer to £400,000-a-week.
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However, the former Barcelona man looks destined to leave on a free transfer as it appears he has no intention of putting pen to paper on fresh terms in north London.
And The Sun say Manchester City will now be reluctant pay anymore than £20m for Sanchez when the transfer window reopens in January.
It is said this is because he will have just six months remaining on his contract at Arsenal, so City are determined to not pay over the odds for him.
Despite this, City remain confident of reuniting Sanchez with Guardiola – with the manager himself refusing to rule out a move for him last month.
When the Spaniard was asked about his interest in the Gunners ace – as well as Jonny Evans and Kylian Mbappe – he said: “Alexis is an Arsenal player.
“Like Mbappe is a Monaco player, like Jonny Evans is a West Bromwich Albion player.
“Normally I don’t talk about players from other clubs.”
The report adds Guardiola will hold talks with Fabian Delph and Eliaquim Mangala this week to reassure them they still have a part to play at the club.