PSG are preparing a huge offer for Alexis Sanchez. (Getty Images)

Manchester City are worried that they will be beaten by Paris Saint-Germain in the race to sign Alexis Sanchez from Arsenal, according to reports.

The Chile international is out of contract at the end of the season and will be free to talk to overseas clubs as from January.

The Sun claims that PSG are ready to go higher than the £275,000-a-week contract offer on the table from City and are also willing to hand the 28-year-old a hefty signing-on fee.

The report also claims that the French club are prepared to sell Edinson Cavani in order to pave the way for Sanchez’s arrival.

Sanchez demanded £400,000 a week from PSG in the summer. (AFP/Getty Images)

Sanchez held talks with PSG this summer but demanded £400,000 a week – a salary which the French side refused to match.

City, meanwhile, are preparing a new offer in the January transfer window and are hopeful that a £20 million bid will be enough to convince Arsenal to sell.

Arsene Wenger has reportedly accepted that Sanchez will leave at the end of the season and will make a fresh move for Thomas Lemar.

Arsenal attempted to sign Lemar on deadline day after they had accepted a £60m bid from City for Sanchez, but the France international opted to stay with Monaco for another season.

MORE : Arsenal boss Arsene Wenger praises Aaron Ramsey performance vs Chelsea

MORE : Jose Mourinho orders Paul Pogba to take holiday before hamstring recovery