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President Donald Trump did not exclude the possibility of a "major, major" conflict with North Korea over its nuclear arsenal, in an interview with Reuters ahead of the anniversary of 100 days in office.

"There is a chance that we could end up having a major, major conflict with North Korea. Absolutely," was Trump's chilling statement.

While the consequences of a major conflict in the Korean peninsula do not bear thinking about, investors probably should prepare for the possibility that economic expansion in the emerging Asia universe has peaked and volatility could be on the rise from here.

One reason for that volatility may be the approaching presidential election in South Korea after the impeachment of former President Park Geun-Hye last month. The election is due on May 9, and the impeachment has divided an already-fragmented political scene even more. Not that investors seem to worry too much for now: Korean stocks hit a six-year high two days ago, riding a wave of global liquidity created by central banks. 

However, the euphoria may not last. Politics and geopolitics are making headlines, but China's economy might become another concern for investors yet again. On the surface, it does look like things are going along nicely. Chinese GDP expanded at a better-than-forecast pace of 6.9% in the first quarter, the fastest in six quarters.

Manufacturing expanded by 7% year on year in the quarter. Goods exports, which reversed a slide in the first three months of 2016 to jump by 9.6% the first quarter of this year, were credited for the Chinese economy's stronger growth.

But the local construction industry, which has underpinned China's miracle in the past, showed signs of slowing. Growth decelerated to 5.3% in the first quarter from 5.9% at the end of last year; it has now decelerated for four straight quarters.

This deceleration comes even though investment in infrastructure and the real estate industry has been going up, propped by ever-rising credit. That credit boom is an increasing risk not just for China but for the whole region and perhaps the world.

"History tells us that credit booms lead to bubbles and eventual crisis," Jason Daw, a strategist specialized in Asia at Societe Generale, wrote in a recent report.

Chinese household and non-financial corporate credit has exceeded 200% of GDP. A similar level was recorded in Japan before the property bubble burst and in Spain before the housing crash. The U.S. subprime crisis happened when household and non-financial corporate credit was below 140% of GDP.

"It is unclear if, or when, the bubble would burst in China, but it is the major medium-term risk factor for the entire emerging markets currency complex," Daw added.

London-based Capital Economics, a think tank, has a proprietary indicator called China Activity Proxy that tries to track Chinese economic growth in order to provide an alternative to the government figures, which many observers distrust.

The CAP index suggests that the Chinese economic expansion slowed down to 6.2% in March from an average of 6.6% in the first two months of the year.

"While one month's data do not make a trend, we think this could be the first sign that China's recovery is starting to run out of steam following the withdrawal of policy support," Neil Shearing, chief emerging markets economist at Capital Economics, warned.

While geopolitics dominates the headlines, the subtle risk of the world's second-largest growth engine sputtering is no less real.

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