The Premier League leaders are understood to be unwilling to go beyond a £20m fee for Sanchez, given there is a chance they could get him for nothing when his Gunners contract expires at the end of the season.
It is hard to envisage Sanchez staying beyond January, but Arsenal will not sell him unless they can bring in a replacement, with a £35m bid for 20-year-old Malcom expected this week.
Wenger, who completes a three-match touchline ban at Bournemouth, feels the trip to the south coast is crucial as he returns to the league following a disappointing FA Cup exit to Nottingham Forest last Sunday and a goalless draw at Chelsea in the League Cup semi-final first leg on Wednesday.
He said: "It looks like Sanchez will not extend his contract".
"Can see the appeal for both clubs".
"Alexis is an exceptional football player, he's a world-class player and if (he leaves) we have to find a different balance in the team", he added. They will have to replace the club's best player and won't even have a big injection of cash to help, with Sanchez's prospective transfer fee a paltry amount for a player of his quality. Incidentally he's won trophies with us.
"He sits tight until the summer and he gets the move he wants, as long as City still want him. That's normal when you're at that level".
Sky Sports reporter Gary Cotterill found the chance too tempting and made a decision to ask Wenger "If you were a player, would rather play for Guardiola or Mourinho?"
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"What is a player's calculation?"
They are also willing to throw in Henrikh Mkhitaryan as part of the deal, which could tempt Arsenal, as they want a replacement before they allow Alexis to leave. If Pep wants him again now, I'm sure he's thinking: 'I'm going to go there second time round and do it properly this time'. It will not happen.
Guardiola said: "I'm focused on Liverpool, believe me". "What do the agents do? All I can say is that Sanchez is a phenomenal player". Yet, around the club, not many people talk or think too much about the Potters. "So you are in a situation where you can not extend the contract of your players".
Reports have claimed Manchester United have now entered the race to sign the Chile forward, who has been a long-term target for City. Either way, it's considerably cheaper than the £60m they agreed to back in the summer so let's not discount a move to the Etihad just yet. "Because the difference on wages between the big, big clubs - financially I speak - and us has become big".
Wenger also confirmed that he has no intention of leaving himself, amidst continuing question marks over his own position.
But the Frenchman was adamant that he's committed to seeing out his contract.
Even if he is not in the team, I still think this is a game Arsenal should win. "I'm always committed. I'm here for 21 years".
Christian Pulisic may be the next American football star to make the move to England. Do I stay for one year or 10 years, it's exactly the same.
"Of course I want a quick resolution", he told reporters at Arsenal's north London training base. You have to try and that's it.