"Am I right in thinking that the Chinese government is turning Chinese Wikipedia into a propaganda machine"
Yes, exactly that. But they are far from alone. Several national governments make a small industry of it; besides China I have encountered Russia on a fairly regular basis. Many nationalistic-minded citizens of these and other countries also do their best to rewrite history their way; here I can vouch for the USA, India, Pakistan and several Central European countries. Maybe some of those have State operations too, other Wikipedians will know better than I. Wikipedia's firm policy is to impose lifetime bans on any such editor who refuses to mend their ways (I have called out a few myself, though usually for personal fruitloopery or abuse rather than political). They even impose permanent IP range blocks on specific institutions from which propaganda appears to originate. These are mostly State institutions, but some hotbeds of nationalism such as certain academic institutions also earn themselves rangeblocks. China just happens to be top of the league table at the moment.
Who could get harmed (obviously Chinese citizens) and why?"
Anybody who does not toe the party line and rewrite Chinese history the official way is at risk. Those on the mainland especially are likely to be visited by the Chinese authorities' heavy mob, with intimidation, career destruction and even violence all on the agenda. Chinese nationals living abroad can expect slightly less open attentions. Even foreign nationals might be in line for an unfortunate accident, who knows.
AC for very obvious reasons. (Disclaimer: I am not a Chinese national, so eff off any Politburo scum seeking to dox this post)