They are working definitely, but will it be successful?
5 years back, quantum entanglement was already being done at a distance of about 100 km.
The difficulty for longer distances was that maintaining entanglement for longer distances was very hard, so almost everybody was proposing to set up a satellite, including people in Europe and Singapore. It was so because while in space, the communication can happen through the atmosphere which at a maximum is 100 km in width, (with outer atmosphere very thin). So even if the satellite is a 1000 km overhead, it will have to just encounter atmosphere for 100 km, and dense atmosphere for 50 km.
China took the lead by recognizing potential importance of this field and assigning appropriate funds to the field. The technology itself was not very unique, in the sense that if the Europeans have given the money to their scientists, they would also have a satellite.
Here, however the fundamental physics lies firmly in the domain of sci fi. I don't know if they can solve all the hundreds of problems associated with this in the future. But even if they do, I can bet that this is not going to be a major part of any actual weapon system or military strategy for at least 15-20 years.