Like I said i hope i'm wrong on Gundogan.
The English player thing is significantly underestimated by many on here. IF, and it's a big IF, you can find players of the requisite talent, then buying English trumps buying foreign for a myriad of reasons. Team spirit, club identity, the lack of a threat that they will want to move abroad (home), their marketing worth, the long term effect upon your position within the league when it comes to buying other talented English players.
Essentially, what United did in the 90's. Buy all the best English players so that every emerging English player wants to play for you before anyone else. It took Wenger's success and Chelsea's money to break that stranglehold United had. Since then nobody has managed to establish control of the English players' market. I think City can and will over the next three or four years. Sterling + Stones were the start.