Guangzhou R&F Properties (>> Guangzhou R&F Properties Co Ltd) will instead buy the property, an R&F spokesman said.
It will be the second time in a matter of weeks that the Chinese developer has stepped in to take over assets from Wanda, owned by one of China's richest men, Wang Jianlin.
Squeezed for finance, Wanda last month agreed to sell 77 hotels to R&F for 19.9 billion yuan ($3 billion) and 91 percent equity in 13 tourism projects to Sunac China (>> Sunac China Holdings Ltd) for 43.8 billion yuan.
China launched a clampdown on capital outflows and overseas direct investment last year, and Wanda, a property-to-entertainment giant, has been one of the companies most affected.
Chinese banks have been told to stop providing funding for several of Wanda's overseas acquisitions in order to curb its appetite for offshore deals, according to sources familiar with the matter.
R&F, together with CC Land (>> C C Land Holdings Limited), is in a consortium to buy Nine Elms, according to a source directly involved in the deal. The price will remain at 470 million pounds ($606 million), the person added, and because the deal is done offshore it does not require approval from Chinese regulators.
CC Land did not respond to an email seeking comment. The developer, run by Chinese property magnate Cheung Chung-kiu, agreed to pay 1.15 billion pounds in March to buy London's "Cheesegrater" skyscraper from British Land and Oxford Properties.
R&F in April also agreed to buy the Vauxhall Square development in central London from CLS Holdings for a gross 157.77 million pounds.
Wanda's International Real Estate Centre said in a statement to Reuters on Tuesday that ownership of the 10-acre(4-hectare) Nine Elms belonged to a third party, following a Monday filing by St. Modwen Properties (>> St. Modwen Properties plc), owner of the London building, that it had completed the 470 million pound sale, without identifying the buyer. China's cabinet on Friday reiterated it would limit overseas investment in property, hotels, entertainment, sports clubs and the film industry, and planned to maintain a blacklist of domestic firms that violated overseas investment rules.
In March, Wanda's proposed $1 billion purchase of U.S. TV production company Dick Clark Productions collapsed under the heightened pressure from Beijing on outbound deals.
(Reporting by Donny Kwok and Clare Jim in HONG KONG, Zhu Zhang and Matthew Miller in BEIJING; Editing by Dale Hudson and Stephen Coates)
By Donny Kwok and Clare Jim