Garcia has told City he will not sign a new contract – paving the way to a potential move to Barcelona.
The teenaged centre back has rejected all attempts by City to convince him to commit his long-term future to the Etihad.
Barca are believed to be leading the race to sign him and will be buoyed by the news he is determined to leave City.
The City manager said: “He announced to us that he doesn't want to extend his contract with Manchester City.
“He has one more year and after that, he doesn't want to extend. We want it, but he doesn't want to extend it so I imagine he wants to play in other places."