Abstract: Based on parametric approach in the framework of an average translog cost function,this paper estimated the scale economies of China’s commercial banks with ISUR approach,compared the results of average cost function with that of frontier cost function estimated with stochastic frontier approach,validated the judgment that the veracity of results of estimating banks’scale economies with average cost function is better than that of frontier cost function and made sure the principle of selecting function type for estimating the commercial banks’ scale economies.It combines the idea of the intermediation approach and the assets approach,and selects the deposits, loans, investments and securities as the production index,so it solves the problems whereas intermediation approach can not reflect the multi-product operating condition and the assets approach can not reflect the deposits condition of Chinese banks.Based on the cost function and input-output indexes system this paper estimated the scale economies of 4 State-owned commercial banks and 10 joint-stock commercial banks of China over the period from 1998 to 2003 with the real banks’ financial data and displayed the conditions and trends of these two kinds banks’ scale economies.The results of empirical analysis shows that Chinese commercial benefit in works for improving their scale economies condition,that all of banks have been scale economies since 2001,the average levels of scale economies of joint-stock commercial banks is better than that of State-owned commercial banks,the scale economies condition of State-owned commercial banks displays increased development trend and that of joint-stock commercial banks always was right but shows some small wave after 2002 which is still better than State-owned commercial banks.

Key words: commercial banks, economy of scale, parametric methodology, frontier function, translog cost function