It receives preferential treatment and is heavily subsidized by the Chinese government while purchasing technology from USA companies like Qualcomm.
Traders have quickly moved out of riskier assets reflecting nerves that the arrest is likely to escalate tensions between the USA and China once again.
In April, China appealed to Washington to avoid damaging business confidence following a Wall Street Journal report that USA authorities were allegedly investigating whether Huawei violated sanctions on Iran amid spiralling technology tensions.
Liu Weidong, a China-US affairs expert from the Chinese Academy of Social Sciences, said Meng's arrest was a calculated act by Washington aimed at improving its hand in trade negotiations with Beijing.
"The company believes the Canadian and US legal systems will ultimately reach a just conclusion".
Meng is the deputy chairman of the company's board and the daughter of its founder, Ren Zhengfei, a former Chinese military engineer.
Canadian law enforcement has arrested Wanzhou Meng, Huawei's global chief financial officer, on the suspicion that she violated US trade sanctions against Iran, according to a Globe and Mail report.
What has Canada said about the arrest?
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Huawei said it had "little information" on the charges but was "not aware of any wrongdoing" by Ms Meng.
Huawei has said it complies with all applicable export control and sanctions laws and USA and other regulations. The U.S. has slapped tariffs on billions of dollars in Chinese goods in what the Trump administration says is an effort to crack down on intellectual property theft and unfair trade practices. Federal authorities said ZTE had violated American sanctions against Iran and North Korea, in a move that caused the Chinese company to cease "major operating activities" for a time.
Earlier this year, it barred U.S. companies from exporting to ZTE, effectively shutting down the firm.
If there is no deal at the end of that period, the United States will increase tariffs on US$200 billion of Chinese goods from 10 per cent to 25 per cent.
New Zealand and Australia have stopped telecom operators from using Huawei's equipment in new 5G networks because they are concerned about possible Chinese government involvement in their communications infrastructure.
There had already been concerns in the United States over the security of Huawei's technology amid worries that the Chinese government could use the tech company's products to spy on Americans, an allegation the company has long denied. "The Chinese side firmly opposes and strongly protests over such kind of actions which seriously harmed the human rights of the victim", reads a statement released by the embassy.
Markets had initially brightened after USA and Chinese leaders agreed a temporary trade truce at a meeting on Saturday.
In May, the Pentagon said that devices from Huawei and ZTE posed an "unacceptable" security risk.
Meng's arrest also threatened to inflame disagreements over Iran and Trump's decision to break with other governments and re-impose sanctions over the country's nuclear development. Three months later, the company eventually reached a deal with United States authorities by paying $1.4 billion in fines, as well as agreeing to overhaul its senior management.
The case showed that China is highly dependent on imports of US-made semiconductors or computer chips and reinforced Beijing's need to become self-reliant on this key technology.