Real Madrid will offer Pepe a one-year contract extension to try and keep him out of the hands of Premier League clubs.
There is known to be interest from China, but should Pepe wish to remain in Europe then there will be no shortage of suitors as top sides look to re-tool their defences ahead of the new season.
And in the Portuguese international, they would be signing a player for free who was selected in Fifa's World XI for 2016 following a Champions League-winning campaign at club level and then a European Championship victory in the summer.
City boss Pep Guardiola knows he cannot rely on Aleksandar Kolarov (performance) or Vincent Kompany (fitness) to play in the big games, and big-money investment John Stones needs a couple of top-level partners to compete for a spot.
Chelsea are also interested in a centre-back this summer and would "kick the tyres" on Pepe but have Andreas Christensen returning from loan and Kurt Zouma coming back to fitness.