Murdoch, the ex-wife of media mogul Rupert Murdoch, was flagged to Kushner by US intelligence officials during a security briefing just before Trump's inauguration, several people with knowledge of the matter told the Wall Street Journal. The $100 million arboretum has been in the works for over a decade but was abruptly stalled after officials suggested the planned 70 foot tower might be used for nefarious surveillance purposes.
The garden was planned on one of the higher patches of land near downtown Washington, less than 8 kilometres from both the Capitol and the White House.
A spokesman said Wendi Deng Murdoch "has no knowledge of any concerns or other intelligence agency concerns relating to her or her associations", and denied she was aware of the garden project.
After Trump's election, Murdoch posted a selfie of herself together with Ivanka Trump at an inauguration event.
He included that she "has definitely no learning of any garden ventures financed by the Chinese government".
A representative for Kushner and his wife described the meeting where the concerns were raised as a "routine senior staff security briefing".
The Journal's story is particularly striking because the newspaper is owned by News Corp, whose executive chairman is Murdoch's ex-husband Rupert Murdoch.
The friend, Wendi Deng Murdoch, a Chinese-American who kept her surname after being married to the media mogul Rupert Murdoch for 14 years, is a prominent businesswoman. She changed her name as a teenager.
However, Marcus Brauchli, a former managing editor of the Journal, expressed doubts about the story.
China, a political adversary to the U.S. and a rising world power, stands accused by the United States of forcing foreign firms to hand over technology and protectionist practices that disproportionately favor their own companies. "I'd warrant Trump does more for Russian Federation than Wendi ever did for China".
Ms Deng is a U.S. resident who was conceived in China. For as little as $3, you can help us.
The article also alleged that Murdoch was helping to identify investments for her husband's company in China and was acting as his "liaison and translator in China".
The FBI said "there was motivation to be attentive" about Ms Deng, despite the fact that "they hadn't investigated her in detail", the WSJ source said.