Foreign direct investment (FDI) theories and empirical studies have generated mixed results for the link between exchange rates, their volatilities and FDI. This study argues that large RMB exchange rate volatilities negatively affect inward FDI in emerging market economies like Zambia, because of the costs inherent in the volatility risk. Using data on exchange rate volatilities of the Chinese RMB,GARCH (1,1) model estimates that the volatilities of RMB is relatively high and likely to pose a greater impact on FDI into smaller economies like Zambia where China has strengthened trade relations in the recent past. After carrying out a multiple regression analysis, using Ordinary Least Square method (OLS), it was found that RMB volatility has a greater impact on FDI inflow into Zambia, and particularly the appreciation of RMB against the US dollar. From the results, it shows that there is a greater negative effect on FDI inflow into Zambia. This is obviously due to the fact that a decrease in the exchange rate between RMB and US dollar (appreciation of RMB) is likely to negatively affect the export of Chinese commodities.Furthermore, the fact that the Chinese economy is to a large extent dependent on exports, if the RMB appreciates, China’s economic growth is likely to slow down. A decrease in the Chinese economy means that Chinese investment in other emerging markets will shrink thereby negatively affecting the flow of FDI in emerging markets like Zambia.